The title of this quick post says it all – make sure you understand your business accounts. It’s really important to understand your business accounts, and be familiar with your responsibilities as a company director. You need to know your responsibilities towards your shareholders if you have any. You need to understand tax. If you don’t something may come and bite you hard on the ass in the future.
I’m not suggesting you go and study to be an accountant, but you should know what your responsibilities are.
So many times I hear of people saying “Oh I don’t know! I leave all that to my accountants”. Well I’m afraid you can’t do that. If there is ever a problem it is your head that will be on the chopping block, not your accountants’. If you’re looking to raise investment, this is all even more important. For example, not being able to say what your turnover, gross and net profit were last year, looks really bad to an investor – it shows you don’t have a firm grasp of your business finances. If you’re thinking about raising capital, then our How to value a business to raise capital might be useful.
It’s also vitally important you check through your annual accounts before you sign them off. Again, it is your responsibility, and it isn’t hard. Even if you have a quick read through and question a few things that you don’t understand, it really is worth it. You need to make sure you understand your business accounts as it’s a fundamental part of running a business.