Business owners understand why they need an accountant.
But if you believe your accountant handles all financial matters, you would be mistaken. This belief arises from a myth – the myth that accounting and finance are the same. They are not!
While accounting and finance are closely related, they have different functions. Accounting is about methodical record keeping, producing financial data, and preparing tax returns. Finance, on the other hand, is about helping a business owner make sound decisions about the future of the business.
If you’re new to business finance, or you feel overwhelmed or intimidated just thinking about it, relax. I’m going to show you how easy and empowering it is.
Distinctions Between Accounting and Finance
First, let’s look at some of the important differences between accounting and finance for a business owner:
- Accounting focuses on past performance of your business. Finance focuses on future performance of your business.
- Accounting prepares the financial data. Finance uses that data in sound decision-making.
- Accounting is analytical and detailed-oriented. Finance is more intuitive.
- Accounting requires discipline and learning. Finance is easily accessible to a business owner with a little guidance.
- Accounting can be completely outsourced. Finance requires involvement by the business owner.
Accounting and finance are complimentary, and both are important. But they are not the same.
Why You Need Finance in Business
Once your business is up and running, the rules begin to change. It’s not enough just to focus on generating revenue if you want to build a prosperous and viable business.
Past performance is no guarantee for continued success. Now, you’re faced with decisions about how to manage your finances and strategically plan for future growth. These decisions can’t be ignored.
Do any of these sound familiar?
- Will I have enough cash in the coming months to operate the business?
- Should I get financing or use surplus cash to grow?
- How can I improve my bottom line?
- Can I withstand a setback – like losing a major client – or will I go under?
- Will this growth opportunity help or hurt my existing business?
- How can I tell if the business’s performance is on track to reach my goals?
- Should I incur a major business expense at this time?
Financial decisions aren’t easy and can’t be ignored. One wrong decision can have a devasting effect on a small business. If you make decisions without financial analysis, it’s like shooting in the dark hoping to hit your target.
Finance in Your Business
So, what does finance look like in your business? It’s not as difficult as you may think.
Finance is a little art and a little science. The “art” part is your business expertise, experience and vision – your business savvy. The “science” part is understanding financial data and risks before the decision is made. The CEO is the “art” part; the CFO is the “science” part. Together they build a strong profitable business.
Most small businesses aren’t ready for a full-time CFO. That’s why I created my financial confidante services: to help business owners harness the power of finance in decision-making, accelerate growth and become more successful.
If you’re interested in finding out how a financial confidante can help you grow your business, please click here to contact me to set up a time to talk.