10 Reasons Why You Shouldn’t Care About Accounting Basics
Business owners really know how to provide quality products and services. But when it comes to simple accounting basics that can make an impact on the success of their business, some business owners are left in the dust.
Being a business owner isn’t for everyone, in fact, most businesses don’t make it through their first year. People who don’t care to learn all aspects of owning a business especially accounting – probably didn’t care about running a successful company in the first place. If you agree with any of the following, you’ll probably find yourself in the same category as them.
1. You don’t care if your business is profitable.
You should only bother knowing the simple accounting if you care about the health of your company. Accounting provides structure to help business owners keep track of whether or not their business has made any money over time and where that money is coming from. Knowing the nuts and bolts will tell you how profitable your business is by keeping track of how much money is going out and coming in.
2. You don’t care about what others think.
As the business owner, you’re not the only one who cares if your company is making any money. Banks and investors are very interested in knowing how well your business is doing financially. Banks will look at your business from a fiscal standpoint to determine whether or not they should loan your company money. More importantly, they want to be sure that if they give you a loan, you will be able to pay it back. Investors will also want to know if your company is a solid investment and a financial statement will tell them not only if, but how much they should invest into your company. The better you understand the ins and outs of your company’s financial state, the more likely the bankers and investors will give your business the money that it needs.
3. You aren’t concerned about employee theft; “they’re like family.”
This isn’t to say that you can never trust your employees – there is no doubt that many employees are hard working and honest – but keeping tabs on your financial accounts can help you keep track of where your money is going. According to Score.org expense reports, payroll, purchasing, and suspense accounts are just a few of the places that disloyal employees are most likely to skim a little off the top. For a complete list of areas where employee fraud is most prevalent and what you can do as an employer to prevent employee theft, read the rest of the article.
4. You like selling products that lose money – you’ll “make it up on volume”
Thinking about reducing prices to sell more products? Think again. While it may seem like it might make sense to slash prices to move more product, you are more than likely loosing out. Reducing prices reduces your gross profit margin and create more effort for your company to break even. Then again, if you knew accounting 101, you probably already knew that.
5. Cash flow isn’t important to you
Your Cash Flow Statement gives you a snapshot of your company’s short-term financial health. Knowing your company’s cashflow is crucial, it will help you to determine if you have enough money on hand to pay employees and creditors on time. Companies who pay attention to their cashflow analysis know that if they have abundant cash on hand are able to invest the cash back into the business in order to produce more profit.
6. You don’t really need to know if your customers have paid you yet
You don’t care your customers don’t pay their bills right? Of course you do! If you don’t keep track of who has and hasn’t paid you, how are you supposed to collect?
7. The IRS doesn’t care if you’ve made your payroll tax deposits
Payroll taxes are the responsibility of every employer. Business’ payroll tax responsibility consists of not only the taxes required to be withheld from employees’ wages -Social Security tax, Medicare tax and federal income tax- but also that the employer’s match their share of Social Security and Medicare taxes. Businesses that don’t make payroll deposits can face some major penalties, including jail time.
8. Your suppliers never call you to collect their money
Just like you want to make sure that your customers pay you, the same holds true for your vendors. Keeping track of your invoices will help you stay up-to-date with liabilities and due dates for bills.
9. Your employees donate their time and don’t expect to get paid
While satisfaction of a job well done is crucial for your employees to be happy and remain with your company, so is a paycheck. Not very many people can afford to volunteer 40 hours of their week. Knowing the basics, like cash flow, lets you make sure that you have enough money to pay your employees for all of their work.
10. Accounting is too difficult to learn anyway.
You don’t need to be a mathlete to have a working knowledge of accounting. Chances are that if you’re smart enough to learn how to run a company, you’re smart enough to learn the fundamentals of accounting.
Hopefully you don’t find yourself agreeing with any of the reasons above, but if for some strange reason you might, then don’t bother to learn anything about accounting; hire a mathlete to take care of all of your finances. But then again if you don’t care about your money, you probably don’t have enough to hire someone who does.