My name is Frank and I am an entrepreneur. – OK, go ahead and say it, “Hi Frank”. With that out of the way, let me unequivocally assert my pride in being an entrepreneur, investor, business builder and job creator. Entrepreneurship at its best is about value creation, innovation and optimization with money being made in proportion to the value you provide.
As a business, the creation of more revenue and ultimately more profits comes by serving customers and clients better and/or serving more customers and/or serving your customer/clients with increased efficiency as you scale. This is not complicated stuff and actually pretty simple to grasp on the surface.
Entrepreneurship is awesome – sometimes it can be awful. Sometimes it can even be awesome and awful at the same time. Entrepreneurship is lonely. Being an entrepreneur is often being out of control more often than you are actually in control. As a business starts, you as the entrepreneur don’t have the benefit of piles of cash, a bench full of talent ready to perform at the highest level and a simple and straightforward path ahead.
No, as entrepreneurs, we are forced to rely on creativity, tenacity, determination and even luck. If we survive our first few assumptions, we live to fight another day. As we have some success, we can reinvest into our business and add outside talent to our mix.
The Balance Between Saving and Investing
When we first start we are often wearing many hats from sales person to accounting person to product development to customer service to – well you get the idea, there is no short list here. The successful entrepreneur learns, adapts and looks for affordable talent to start replacing themselves or other early staff members to where everyone is doing what they do best.
This takes time and is sometimes filled with challenges and heartache. There is a saying attributed to Ben Franklin about avoiding being, “penny wise and pound foolish” – this roughly translates to, “Don’t try and save a buck and cost yourself a fortune!” OK, I added a little to the translation, but to make a point. As entrepreneurs, we need to be prudent and save money where we can, but not to foolishly save some dollars today at the expense of the future costing us far more than we can imagine.
Penny Wise and Pound Foolish in Accounting
I know firsthand what this challenge is and nowhere does it hurt more than trying to be cheap with the core accounting function of your business. I am no accountant for sure. However, over the last twenty years as an entrepreneur –in both the creation of several successful multi-million dollar businesses as well as some serious mistakes, setbacks and dare-I-say outright failures — I’ve actually learned a thing or two.
I have come to totally appreciate the bookkeeping and accounting function of a business as a way to not only keep score, but also as a clarity and business decision tool. There are many lessons I could share, but the main one for this article is to beware of the three most expensive letters in the English language. D, I and Y.
Certainly DIY can be helpful as a strategy– especially when starting out and resources are scarce. DIY can also be a planned bridge from where you are to where you need to be.
When DIY Becomes OMG
But when DIY outlives its utility for helping you survive, the very nature of the value it once provided now works against you. As a specialized and virtual outsourced accounting firm for entrepreneurs, we see evidence of the cancer of DIY as well as the carnage left behind when DIY is actually an unqualified (but certainly trustworthy and good intentioned) family member doing the bookkeeping as a way to save money. This is typically where DIY gets dangerous and can easily slip into OMG or other dreaded three letter acronyms.
DIY is dangerous and easily slips into OMG when you are saving pennies yet costing yourself dollars where you could be growing the business. DIY can be just as scary when you instead place all your trust in a single person as your sole bookkeeper as a way of saving money. This is dangerous because it creates a single point of failure and significant risk.
There is no more dangerous place for an entrepreneur than when the entire livelihood and everything they have worked for is placed on the fulcrum on one individual as “the bookkeeper”. If you ask 100 entrepreneurs with significant history to tell you their horror stories, I would bet the majority of them would share a “bookkeeper gone bad” tale.
Even if it is not theft, fraud or embezzlement, the threats of letting the wrong person lead your financial ship are frightening. Whether because of lack of horsepower, knowledge, experience, control issues or generally not being the right person to help you navigate difficult waters or avoid them altogether – this familiar tale rarely ends happily!
From DIY to Investing in a Trustworthy Team
Having the right bookkeeping and accounting team in place provides you an accurate picture for the health of your business today. It also helps you with clarity and the right information for making the best decisions to help you maximize and grow your business for tomorrow.
Do you have great systems to know exactly what is happening in your business? Do you have key information and simple systems to help you confidently know where you will be tomorrow and into the future? Do you have confidence in your numbers and know how you stand relative to your competitors and your industry and where you want to be at this stage of your business?
If you are currently in a situation where you or a trusted friend or family member is doing your bookkeeping, but you feel like you are flying blind, it might be time to ask yourself if you are being penny wise or pound foolish. It might be a good time to look at finding them another seat on the bus – unless you are looking to have some great horror stories of peril and danger to share over the next camp out with all your entrepreneur buddies.
Want to learn more about how to get out of the trap of DIY?Check out this free guide on the power of virtual accounting.