Starting a business is a calculated risk. But starting one without any knowledge or advice on accounting and finance is a risk business owners must avoid.
“Finance is the art and science of watching the money flowing into and out of a business, then deciding how to allocate it and determining whether or not what you’re doing is producing the results you want,” Josh Kaufman wrote in The Personal MBA.
“Accounting is the process of ensuring the data you use to make financial decisions is as complete and as accurate as possible. It’s not any more complicated than that.”
So if it’s not that complicated, why do tens of thousands of businesses fail?
In December 2022, the number of Australian businesses dropped by 33,810. That was the first drop after eight consecutive quarters of growth, the Australian Bureau of Statistics (ABS) reports showed.
While there were 116,472 new businesses at the end of 2022, these were outnumbered by the number of exits: 150,282. Businesses that have been acquired by another entity are counted as exits. So are businesses that have cancelled their business numbers or stopped remitting goods and services taxes for a long time.
What do business owners need to know?
About 98% of all businesses in Australia are small businesses, employing 19 or fewer persons.
It’s easy to imagine how the overall economy would benefit if business owners were better informed about accounting and finance or had access to online accounting courses.
The failure to apply accounting and finance best practices is one of the most common reasons businesses fail. For years, Grace S. Walsh and James A. Cunningham have studied business failure and entrepreneurial learning—including “how entrepreneurs learn about the practical aspects of starting a business and about themselves as human actors.”
While external factors like a shortage of startup capital or the lack of demand can cause small businesses to fail, Walsh and Cunnigham observed, internal factors matter just as much. Businesses can fail because of:
- a lack of systematic record-keeping.
- a lack of financial control.
- the absence of effective management knowledge and skill.
- poor quality products or services.
- inefficient or wasteful operations.
If you’re a business owner, you don’t need advanced studies to understand the accounting and finance essentials that will make you a more effective business leader (although having an advanced degree does not hurt either). You just need to understand how to:
- keep your profit margins and cash flow healthy.
- make better decisions based on a sound understanding of cash flow and income statements, balance sheets and cost-benefit analysis.
- apply internal controls to stay on budget and compliant.
- protect your business against fraud, theft or waste.
- know what key performance indicators and financial ratios to track.
Empower yourself and your business
We have a course that can help you. With the FNS40222 Certificate IV in Accounting and Bookkeeping, you will equip yourself with the ability to:
- prepare operational budgets.
- set up a cloud accounting system.
- process transactions and prepare financial reports.
- maintain your payroll system.
- complete business activity statements.
It’s delivered online, to suit busy business owners and professionals’ schedules. You’ll enjoy access to the course materials for up to 24 months after you sign up. And you’ll meet other business owners who understand your challenges and can share what has worked for them.
Since 2018, the Ab² Institute of Accounting has been innovating to fill the gap in accounting knowledge and skills. We’ve taught the Certificate IV in Accounting and Bookkeeping to accountants who support more than 1,000 global business partners, as well as business owners themselves.
Explore how this course can empower you and your business.
Download your course guide here.
New Certificate IV in Accounting and Bookkeeping FNS40222 (ab2institute.edu.au)
