It’s Not About the Numbers
By Sherry Lutz Herrington
It’s not about the numbers, it’s about the story the numbers tell.
I say that all the time and I believe it. Of course, the numbers matter, but by themselves they don’t mean much. You have to put them into the context of what they mean to have them be useful.
Tracking your financial data is crucial to the success of any business. It is the foundation on which you build. Like building a house you have to start at the bottom and work your way up. Same with a business. Start with the critical information provided by the numbers.
If you don’t have clean, up to date numbers, how can you possibly know what is happening?
The numbers tell the story of what is happening, and they help you write the next chapter.
Once you know where you stand, you can decide where you want to go.
Let’s look at this two ways.
Let’s say you’ve started a new company and things are going really well. You are making lots of money and are seeing your efforts pay off. You have money in the bank, you’re taking what you need to live, and you’re having a grand time doing tons of fun things. Everything seems great, so you don’t bother setting up a formal accounting system and just watch your bank balance. You deposit your receipts on time, pay your bills on time, and are enjoying your success.
Then one day you go to pay for more supplies to make your amazing product and you discover there is no money left in your account. What went wrong? How did you end up with no money?
We’ll get back to that answer in a minute.
Let’s look at Example 2:
You start a new company and are full of energy and excitement, but you think maybe it would be a good idea to call on an expert to be sure you have help setting up the books. So, you get everything set up properly on a good accounting system and you get trained on how to keep the books up. Then you start selling your product, tracking every penny that goes in and out. At the end of each month, your accounting professional reviews the financial reports with you and explains how much money you have left over to pay yourself. You only take enough to get by, and you keep as much as you can in the business.
Then it comes time to buy more supplies to make your amazing product and you have plenty of money to order more and keep going. Eventually, you realize that you could be making another amazing product, but you need to spend some money to figure out how to make it. You have enough money, so you invest in creating another great product. Soon, you are selling tons of your new great product, still tracking your finances, and being smart about the decisions you make based on your accurate financial reports.
Yay! You’re running a successful business and get to write your story however you want.
Now, back to Example 1.
You can’t figure out why you have no money so you go to the bank, and you borrow some so you can purchase more supplies and make more product. You’re back in business and off you go.
But a couple of months later, the same thing happens. And before you know it, the bank is banging on your door asking you to pay them back. But you have no money, so you’re out of business.
Two very different scenarios. The difference? Knowing the story your numbers are telling you and using them to make decisions. Being smart with your money leads to success. Ignoring your accounting and thinking you can just “wing it” won’t write a long story with a happy ending.
Only paying attention and understanding your numbers will get you to the end of your story with a positive outcome.
It is about the numbers, in a way. It’s about understanding them and using them to your benefit. Don’t ignore them and run your business without the guidance they offer. You choose how to write the story of your business – with or without the financial information that clean accounting provides.
Sherry Lutz Herrington is the owner of Sherrington Financial Fitness, a business consulting and accounting firm specializing in strategic business planning and solid financial accounting for businesses. She is also the author of Strong Women Thriving (www.strongwomenthriving.com), a blog which focuses on empowering women to be financially savvy, particularly after experiencing financial abuse. Sherry is currently writing a book that both shares her personal story and addresses financial abuse. She can be reached at email@example.com.
https://sherringtonfinancial.com/blog/ for more blogs!
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