You don’t have to be a math whiz to master finance
Julia just joined a dental office with her three partners. She was asked to become a co-owner of the business and entrepreneurship intrigued her. Before she joined, each practitioner is responsible for different parts of the business: marketing and client services, human resources, operations and they left the finance responsibilities to Julia and the external accountant and bookkeeper. No-one wanted to oversee finances because it appeared to be difficult to master and after all, they seemed to be earning a lot of revenue. Julia quickly learned that the business faced ongoing cash flow challenges due to a slow start as well as heavy investments in equipment, supplies and facilities – this perpetual problem drained everyone and of course Julia was under the gun to produce numbers. Julia hated math and her fears came to light when she opened up her accounting software and couldn’t make heads or tails of how things worked. Although their external accountant and bookkeeper assured her that everything was set up appropriately, Julia was still riddled with uncertainty because she could not figure out which report(s) she could print to understand whether they were making a profit and why they were so cash strapped.
Get you head out of the sand Julia, you need to take control!
Julia didn’t have time to take a business course and needed to take control of the practice’s finances. She hired a financial coach to help her navigate the system. She quickly learned that there were four different types of financial statements – one that measured the wealth of the business, one that measured how much profit was being earned, one that showed how cash was being drained and one that listed all her assets and liabilities. She realized that to address her financial challenges she needed to interpret each statement and then link the numbers to key business decisions she and her partners were making. She interrogated the profit loss statement to see where she could save money on expenses; she looked at her balance sheet to find out if there was a better way to finance the business; and she looked at her cash flow statement to see what was causing her cash drain. Julia didn’t need to become an accountant, she needed to learn how to read statements. And more importantly, when she did so, she requested her bookkeeper to prepare special reports for her to simplify the reports and give her a bird’s eye view on how they were tracking. By being more literate with her finances she could influence the partner decisions and control costs better.