Accounting vs Finance: Understanding the Difference and Why You Need Both
“We didn’t make money last year. What should I do?”
If you ask your CPA this question, the answer is usually “raise prices” because that is generally their standard answer.
However, that might not be the right answer.
The answer can be found in financial analysis – what happened to overhead, raises, productivity, and more. Unless your CPA has been providing you with monthly financial reports AND financial analysis of those reports, then he or she is not equipped to answer this question.
That’s the difference between finance and accounting. The old joke, accountants match debits and credits and finance people care what those debits and credits mean.
You need both – the accounting to produce the financial statements and the financial analysis to ensure the statements are headed in the right direction.
Numbers don’t tell the story – graphs do. You should see pictures of what each of the 14 graphs I’ve written about over the years. Know that your business is headed in a financially healthy direction.
Do the financial analysis yourself. Read a book. Take a class. Use Financially Fit Business software – either self-directed or expert-directed analyses.
It doesn’t matter which tool you use – just analyze your financial statements every month. Make sure the trends are headed in the right direction.
How financially fit is your business?
Click here to take this one minute assessment
This Week’s The Financially Fit Business Podcast:
Subtle Changes in Financial Statements Mean A Lot – Part 3
In this series I discuss paying attention to subtle changes in profit and loss and balance sheet trends. It’s best to spot them and resolve them before they become major cash flow, productivity, or profitability problems. In part two I discuss the productivity trends.
Click below to listen: https://financiallyfitbusinesspodcast.podbean.com/
Books/Audios that could help your business and you!
Blueprints of Success is an easy-to-read book that was written for contractors but is applicable to any small business owner who want to grow their businesses.
You’ll probably recognize some of the mistakes that you’ve made.
Timothy gives suggested implementation actions to avoid these mistakes.
Click here to order on Amazon.
Proven Operations Manuals
- Best Practices to Operate a Profitable Business
- Customizable
- HVAC, plumbing
- Residential and Commercial
Click here to get started.
Financial Statements Matter
Written in English rather than accounting babble, discover what your balance sheets and profit and loss statements are really telling you. Make better business decisions based on accurate, timely financial statements.
For Retail businesses: Click Here
For Service businesses: Click Here
For Home based businesses: Click Here
For HVAC and Plumbing businesses: Click Here
For Irrigation/Landscaping businesses: Click Here
