I once took a daylong course called "Accounting For Non-Accountants." The CPA who taught the class said that the biggest mistake business owners make is to hand over their accounting to someone else. His point was not that business owners have to do all of the accounting tasks, but that business owners need to understand what is happening with the money.
Many business owners get into business to do what they love to do. Paying attention to money feels like a big distraction, and they are eager to let someone else take care of it. People who get into business to do what they love can also be influenced by the idea that money will come if they do what they love to do.
I also attended a seminar featuring a charismatic speaker. He could command the audience with the power of his personality. During the course of the seminar, he talked about his wonderful office manager. He talked about what a gem she was and what a gift it was to him that he had someone so competent handling his finances so that he was free to do what he loved to do.
The speaker who handed over complete control of his finances to his office manager had a very different story to tell the next time I heard him. This time, he told how the wonderful office manager had embezzled more than a million dollars from him. The speaker was broken-hearted because the person he trusted with his money was not trustworthy. This is a powerful example of what the CPA warned against. When business owners treat money as a distraction from the work they love, they miss the fundamental difference between a business and a hobby.
When you have a hobby, you can do what you love and forget about the money. When you start a business, forgetting about the money can be the quickest path to business failure. The IRS has criteria to determine whether you have a hobby or are running a business. The difference concerns whether or not you make money with what you do. At the heart of the matter, the function of business is to make money.
Think about it. Business owners go into business to make money, and yet they often treat money as the most distasteful aspect of business.
From this perspective, it seems very shortsighted to hand over control of the money to someone else. If you are in business to make money, the money is the most important part of your business. The opposite temptation is to get so involved in taking care of the finances that you have no time or energy left over to do what you love.
This leads us to the question: What do you do about money in your business? The lifeblood of your business is money and knowledge of money is power. The fastest way to give up power in your business is to give control of your money to someone else.
There is no royal road to business success that will allow you to simply hand off all knowledge and responsibly about money to someone else. At worst, you will become victim to embezzlement or incompetence. At best, you will never feel in control of your business, because you don't understand what is happening with the money.
The solution is to understand that your business exists to make money. As a business owner, it is up to you to control the money coming in and going out of your business. You don't have to do the data entry, but you do need to understand the data.
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