Why you need to understand your numbers
Emmie Faust
Building community of 10K Female Founders | Mum of 4 | Co-Host Alternative Funding Show | Exited founder posting all things entrepreneurship and growth
If you’re a startup Founder, serious about scaling right now, follow me on LinkedIn for useful information and support.
Despite using ‘top’ London accountants, we had a situation in our first year where our accountants overstated our profit by ￡100K because they didn’t properly understand our business.
Or maybe they just put a junior person in charge of our account!
Luckily we didn’t take that profit out in dividends. I spotted the mistake and had it corrected soon after.
That was a sign to keep a grip on my numbers and what was going on in the business. While I could use an expert to do the work, I still needed to know what was going on.
Make sure that you understand your financial documents like your profit and loss.
I suggest that you get your management accounts done monthly- don’t wait for six months or a year until you get your year-end accounts to understand what is going on. That’s a recipe for disaster.
When we had our media agency we would have monthly board meetings and review our management accounts each time. That meant that we were always on top of what was going on. And I would encourage you to do the same.
Outsource all the actual work to an expert, but please don’t underestimate the importance of having someone on your board of directors (and ideally you as founder) who gets the numbers. It is super important.
I have been into quite a few founder businesses who are amazing at what they do, but they don’t have a good (enough) grasp of the financials. Mistakes had been made that cost them a lot of money. I helped them identify this, and it was rectified pretty quickly - but just before it was too late!
Do you review your financials regularly?
Do you have someone on your board of directors that is confident in understanding all these figures and can keep you up to speed if that is not your forte?
Would you like more insights like this? I share my top 6 tips to help you scale a successful business in my free guide - just click on the image below.
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