Accounting is More Than Theory

Some business owners think accounting is boring and they may be right, but then again maybe not. What does that mean?

A Little Background

I’ve seen business owners literally or figuratively roll their eyes when it came time to discuss financial results. Alternatively I’ve seen them try to avoid the discussion at all or even blatantly say that accounting is boring. You know what? It is. Yet, it isn’t. That may sound like a conflict but allow me to explain.

Usually when I see this kind of behavior it is in response to some accounting issue that seems to require some understanding of accounting theory. While there may be some need for that, accounting is more than theory. When as a business owner you find your mind drifting off to la-la land when your accountant starts discussing one of the finer points of accounting, here is a suggestion. Stop them. Tell them you want to know the reason this is important. Then tell them to give you an abbreviated version of the theory or principle if it is necessary for you to understand the significance. But, seldom as a business owner do you need all the details of the accounting theory or principle.

Some Examples

Imagine your accountant says they need to discuss depreciation charges with you. Do you really need all the theory behind depreciation or would it be more helpful if they simply explained that there are some options on how something is depreciated. Perhaps the entire amount can be expensed in the year of purchase. Or some method may be used to record larger amounts of depreciation in the early years of owning an asset. Regardless, I urge you to make them get to the bottom line of the issue and not get lost in all the finer details of the theory behind it. After all, what you are most interested in is what will produce the most beneficial results for your company. Don’t let your accountant be merely a dreamer who cannot clearly communicate actionable information.

dreamer

Another example might have to do with managing inventory levels. Do you need to know the theory on calculating purchasing quantities or would it be more helpful to know the best things you can implement to make sure that inventory levels are sufficient without getting way too large.

Both of these are just two examples demonstrating that accounting is more than theory and that in the end the thing that matters is the results. Yes, there are various accounting theories that need to be understood by you, but probably not to the extent of your accountant.

Make it Practical

Work closely with your accountant to be sure they understand what you need to run your business. That said, have a little flexibility as sometimes you really do need to understand the theory behind an accounting principle that must be followed.

So here is a little confession. Although I come from an accounting background, I generally find all the theory stuff pretty boring as well. Since accounting is more than theory I’m more interested in getting to the “so what” part. That is, just how can this be implemented or applied to the benefit of a business. It’s very much like the concept that ideas mean nothing without action to implement.

Perhaps a Part-time CFO or Controller could help you understand your financial information better, particularly if they are practical and bottom-line oriented.

If you want to know more, contact AimCFO – Contact

As always, your comments are welcomed.

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