Why I Am Passionate About Accounts
Your journey to profitability ...
Posted on: 12/06/2014 By: Maureen Windridge
Accounts tell a story and it is a very interesting story - it is the story of your business. A set of management accounts can have an assortment of schedules that give you masses of information about your business and they can vary according the size and type of business you have ...
you can consider your profit and loss account to be a signpost on your journey
As any good Bookkeeper worth their salt will explain to you, the commonality which Management Accounts share is that they all usually have a Profit and Loss Account and a Balance Sheet. The Balance Sheet is a snap shot of your business at a given point of time; it lists the assets and liabilities of the business and it tells you how the business is financed. The Profit and Loss account details the income and expenses of a business over a specified period of time. So in essence, the Balance Sheet tells you where the business is and the Profit and Loss account tells you how it got there. Together, they speak to you of the amazing story of your business.
A set of management accounts produced over a year's trading is equivalent to a travelogue, detailing the journey a business takes over the year. The Opening Balance Sheet is like the prologue; it sets the scene and makes sure the reader understands and can make sense of the background to the story.
Each monthly Profit and Loss is a chapter. In each chapter you can see how much the business has progressed towards its intended destination. Were there any setbacks? Is it necessary to make a diversion or can you see that everything is going to plan? Of course you need the Balance Sheet updated each month so you know exactly where you are if you do need to change your route.
The closing balance sheet is the epilogue; it describes the destination and sets the scene for the start of the next journey in this epic tale.
Imagine planning a journey to anywhere; if you don't know where you're starting from, how do you know which direction to travel in? The Balance Sheet gives you that information. The Profit and Loss account is the history and - of course - we learn from history.
So the message here is to keep your accounts up to date: use them; learn from them - then be empowered to take your business on an amazing journey to success!
If you'd like me to be your guide, please call me on +44 (0) 1908 692378 or click here to ping over an email and I'll get right back to you.
Until next time ...
I consider myself to be incredibly lucky because I am a bookkeeper. At the age of thirteen I did a three year course in three months and passed with distinction. Many years have gone by since then and I am still fascinated by the process of double entry bookkeeping. A process developed over 500 years ago by a venetian monk called Luca Pacioli.
Many people would like a machine that they could put all their paper work into at one end and it would come out the other end all sorted totalled and balanced. I'm glad it hasn't been invented because it would take all the fun out of my work!