Page 26 - Paulisms: Gold Nuggets for Small Business

the month. Know where you are at. Profits are not optional in business. Understand what a P&L is and how much you made or lost in that month. Learn how to read and understand a balance sheet. You need to know! You need good data, as unless you have good data, you cannot make good decisions.
If you are over 3–4 months into the new financial year and you haven’t got a full set of accounts for the previous year, demand them from your accountant and consider sacking them. Don’t moan about the accounting cost, as its going to cost you big time if you haven’t got the information. You cannot wait that long to know where you are at. It’s no good suddenly knowing you have a problem six months later, as you will have been going for six months with the problem. That is also why a P&L report in the first week of the month is so important. Business can change dramatically month to month and you may need to move very quickly as a result of the data and information you receive about the previous month’s results.
Accounts are the first thing a prospective buyer will want to see. You may be starting up and have no intention of selling, but one day you might want to, or you might get a knock on the door to sell. Have your accounts clean and ready. Create a habit. You should always have your accounts up to date: it will provide a real-time position of where you are at and also make you prepared for the day you may want to sell – something I will go into more in Part 2: Chapter 3.1.6.
Denis Moody of Melbourne, a friend and retired accountant, once said to me, ‘Paul, accounting is like a cricket match, a P&L like a cricket scoreboard, a scoreboard like a financial number matrix.’ Relate the scoreboard to a P&L and accounting. It provides a real-time picture of where you are at.