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Are You Making This Money Mistake In Your Business?

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.

At another seminar, a charismatic speaker talked about his office manager. He said that he was so grateful that he had found such a wonderful, competent person to take care of his finances for him, so that he could do what he loved to do. He spoke at length about the sense of freedom he had because he didn't have to think about money in his business.

The next time I took a seminar with the same speaker, he told a very different story. He talked about how heartbroken he was because his wonderful office manager had embezzled more than a million dollars from him. He treated the money as a distraction from his work, and so handed over complete control to someone else. This is the big mistake the CPA talked about. By treating money as a distraction, he missed the essential different between a business and a hobby.

The IRS makes the difference between a hobby and a business clear. The primary function of any business is to make money. You can do what you love and forget about the money if you have a hobby. If you have a business, not paying attention to the money is the shortest path to business failure.

Isn't it odd to think that the primary reason to have a business is to make money, and yet many business owners don't want to deal with the money?

When you stop to consider that the reason to have a business is to make money, it seems very shortsighted to surrender the most important part of your business to someone else. The other extreme is to spend so much time keeping track of the finances, paying bills, and doing data entry that there is little time or energy left 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.

Unfortunately, business success requires you to know what is happening with money in your business. You can never find the royal road to business success that will allow you to simply hand off all knowledge and responsibly about money to someone else. In the worst cases, you are at the mercy of embezzlers and incompetents. In the best cases, you'll never feel completely in control of your business, as long as you don't understand what is happening with the money in your business.

So what is the solution? The solution is to understand clearly that control of the money coming in and going out of your business is your responsibility. You don't have to get involved in doing the details of bookkeeping, but you do need to understand the data. If you are in business, your business exists to make money.

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