How to understand what your accountant is saying!

All professions have their own jargon and accountants speak a language foreign to most business owners called ‘accountanese’. Just the same as website designers and IT guys speak a language I call ‘ITgeekspeak’.

Do you sometimes feel overwhelmed when you leave your accountant’s office thinking, ‘Why can’t they just speak English?’ You have just spent an hour or so with them and you still have no idea where your business is actually at.

If you have ever experienced this feeling here are some tips to remember for the next time you meet or speak with your accountant and they are not speaking your language:

  • Tell them to STOP
  • Ask them to speak in layman’s terms
  • Ask for answers relevant to your business
  • Ask questions that will give you the information you need for YOUR business

Business owners do not necessarily want nor need to know what the ‘return on equity’ is, for example. There are a myriad of accounting ratios that indicate performance; however, they do not tell you what profit you are really making, what your profit is this month compared to last month or to the same time last year, what your cash flow looks like, why there is a difference between your Profit and Loss Statement and what is happening in your bank account, or whether your staff are performing efficiently and are bringing in enough revenue.

You need to ask your accountant how long it takes for you to get money in from your clients or customers, and how long on average it takes for you to pay your suppliers. These are questions that are paramount to understanding cash flow in your business. Questions like these are simple for your accountant to answer.

The best form of advice I can give you is: Ask specific questions related to YOU and YOUR business; don’t ask for general feedback. Think about the specific pain areas that you are experiencing in your business and the challenges you are facing. Asking specific questions directly related to your business will help your accountant identify the exact information you are looking for. With accurate, plain English answers in hand, you will be able to make the necessary changes that will improve your future profit and loss and the performance of your bank account!

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