Many small-business owners have a natural aversion to finance and financial statements. Unlike sales or product development, which are considered core to success, finance is seen as a necessary evil that's best left to accountants and “numbers guys.”
Part of this perception is the fault of the finance industry itself, which loves to use jargon. The income statement, for example, is also called the operations statement, the statement of profit and loss, the “P&L” and many other names. It's difficult enough to understand what the core financial statements are trying to say without adding a thick layer of jargon to them.
The other challenge related to finance is that a significant portion of the data we use to arrive at conclusions are estimates. Finance isn’t just about reporting what we know has happened; part of it involves make educated assumptions, guesstimates and guesses in some cases. This lack of precision can turn off small-business owners who think their time is better spent selling than coming up with guesstimates for next quarter’s statements.
It's important for all small-business owners to be aware that preparing financial statements and using them to make business decisions are both valuable exercises that can yield better business decisions. It will give you a very different perspective on your company compared to what you understand from the sales, marketing or operations sides.
[Harvard Business Review]
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