Financial planning is something that doesn’t always come easily. But for business owners, it’s an essential part of running your business. Making sure that your financial performance is on track to meet your goals is critical to success. This is one of the reasons dedicated finance departments exist – their whole job is to manage the finances of your business and keep everything running smoothly. But in SME circles there is a lot of misinformation and myth around financial departments. So today, we’re going to talk about 5 of the biggest myths we hear and why they just simply aren’t true.

Bookkeeping is Just Admin

Bookkeeping often gets filed under ‘admin work’ – and many small business owners actually outsource their bookkeeping to their Virtual Assistant to keep costs down. But there’s a lot more to it than that, and it’s not something that should be farmed out to just anyone. For example, if you’re handling foreign payments, you may need to be aware of any legislation that applies to avoid any mistakes. A good bookkeeper can identify trends in your sales or expenses, and help you mitigate risks as well as better understand the financials. They can  assist your business’ audit preparation. In order for you to make the best decisions for the growth of your business, you need to have accurate, up to date financial information, which means a foundation of good bookkeeping is important.

Accounting Software can Give me Management Accounts

Sadly not. Programs like QuickBooks and Xero can produce reports for you based on the data you put in, but that’s really as far as they go. They can’t give you any qualitative information on that data. Management accounts are all about taking your numbers and using them to understand what’s going on in your business. Regular management accounts can make you aware of successes and danger in a timely manner, so you’re in a better position to act. They can be even more valuable if you’re looking to grow, as you will be able to plan ahead based on real-life facts and figures. Accounting softwares can’t give you that – but an accountant can.

Sales, Profit & Loss and Cash-flow are all the Same

Definitely not! There are a number of different types of reports you can create, and they all tell you different things and serve different purposes. Sales is all about the sales you make – what you sell, how much you sell it for, individual profit margins etc. It focuses entirely on your income and the detail of your sales figures. Profit and loss on the other hand is a financial report including the revenue, costs and expenses of a specific time period so that you can make comparisons. And cash-flow forecasting is all about predicting how much money you expect to go in and out of your business in the next few months, based on actual data.

All Accountants are the Same

While a lot of accountants cover the same basic functions, that doesn’t mean they’re all created equal. For example, an accountant working in bookkeeping will be able to balance your books expertly, while another accountant only checks your financial records and submitting your end of year tax returns. Another might be an expert in tax, so can help you save money, but won’t be able to help with your bookkeeping. This is one of the reasons hiring an outsourced finance department can be the better option – you get access to a full finance team each with their own specialism to help make your business a success.

Small Business Don’t Need a Finance Function

You might think only bigger businesses need a finance department, but even start-ups  need help and support with their money. From handling the everyday work like bookkeeping and accounting, to generating management accounts, creating strategic plans and advising on specialist areas, the knowledge and insight a finance department can provide you will help you make the best decisions possible for your business.

For more information and advice about managing your finances, just get in touch today to book your free, no-obligation chat with one of our experts.