What is Accounting? Why is it so essential to understand Accounting fundamentals, especially if you are a business owner?
Well, Accounting is just a system and the business language. Yes, you heard it right. It is a business language. It is straightforward, but you will have a lot of confusion if you are learning it for the first time. When I first started studying accounting, all the debit and credit microdetails were challenging for me to understand. However, I realized that if I want to get better at it, I have to continually practise it, just like if you want to learn a language, you have to speak it. But at the time, for me to practice more, I decided to meet up with those who just started learning Accounting, or they were a different major, but they were curious about this oldest system for tracking data. An old Japanese proverb instructs: “Those who want to learn must teach.” In my case, the more I thought and practiced, the more I learned. So for me, it was a win-win situation. Therefore the more I learned, everything started to make sense to me, and I understood the importance of understanding accounting fundamentals.
Well, then the question arises. Why should any business owner or anyone who has nothing to do with accounting understand the basics of it?
Good Question! I mean, isn’t it more comfortable to leave all these debit and credit stuff up to someone else who does it for a living so you can concentrate on your projects? Sounds nice, but I know that reality is different. It does not matter what department you work for every time there is a business meeting, Accounting terminologies is there, and it is like a nagging and unhappy girlfriend – always demanding and demanding. 🙂
Not understanding the language of business and only relying on Accountants is a bad idea for several reasons:
First thing first, Accountants don’t know your business and what is going on in your business better than you do. Therefore, when Accountants give you advice, you should understand Accounting in order to make the final decision about what is best for your business.
Secondly, let’s not forget that information is power. Not every Accountant in your team will be honest or detailed with you. Therefore, If you cannot understand what he or she is talking about, you will not know which question to ask or how to make decisions on your business investments, etc.
Some people think that if they have Accountants, everything is set up and good to go. They should not be bothered about making decisions for budgeting for future investments. This is wrong! Let’s not forget that since Accountants don’t know your business as much as you do, they are more likely to make bad decisions. For example, the Accountant should not have created the budget; The manager should have done it.
Business owners and managers are responsible for the results. Accountants are not the ones making sales, do marketing, or design products, etc. Their responsibility is to compile and report data.
If you want to become in a better position or go far in your career, you better understand how money works. If you understand it, you will be able to talk about money as well. Remember, if you can not talk the talk, you won’t be promoted to walk the walk.
With all these being said, understanding the fundamentals of accounting is essential because you can not become a successful business owner without having a handle on how the business is doing financially. I understand that every profession has its terminologies, cryptic vocabulary, and its own rules. Accounting is just one of them!!