The internet is not short on many things and Warren Buffett quotes are one of them. There is one specific quote that Buffett said that accountants and financial professionals love to use.
Accounting is the language of business
Warren Buffett
BAM! Us accountants have been telling you how important we are for years and now we finally have one of the most successful investors in human history backing us up, right!?!?! It’s no wonder then why the approximately 665,000 active CPAs in this country are living the high life. Of course, there is a lot of sarcasm in many of these statements. While Buffett himself is a master at finance, he does not possess an accounting degree or really a background in the subject and he has done OK for himself.
The more interesting quote for the importance of accounting comes from Buffett’s long-time partner, Charlie Munger.
You have to know accounting. It’s the language of practical business life. It was a very useful thing to deliver to civilization through Venice which of course was once the great commercial power in the Mediterranean. However, double-entry bookkeeping was a hell of an invention.
Charlie Munger
I won’t geek out right now and go into double-entry bookkeeping (which trust me, is exactly as exciting as it sounds), but Munger points out something that most small business owners struggle with. As a small business owner, you do not need to know how the reports are generated or all the inputs. However, you do need to be able to interpret the reports. All successful companies, no matter the size, are doing financial reporting on a regular basis. The next step is interpreting that information and using it to help form and guide strategy. Many of these successful small businesses have an accounting or financial professional which helps them with all of this.
You might say that pointing this out is somewhat self-serving to the accounting and financial professionals industries. While you might not be entirely wrong, let me point out something additional. Among the top 10 reasons businesses fail are insufficient capital, improper planning, expanding too quickly, unprofitable business model, and running out of money. The root of all of these come back to a lack of financial reporting or misguided strategy.
This information is not hard to find. Most small business owners know that these are reasons they may fail when they start an endeavor. Why then do so many small businesses succumb to the notion that their accounting and books are not important? Why do so many do their books only as an afterthought come tax season? Why do some go to all the work of hiring a bookkeeper, but not someone that can better interpret the numbers?
The answer is, “I don’t know”. For some, the feelings around math are so strong, they do anything to avoid it. For others, they don’t feel like investing in their accounting and financial strategy is a worthy investment. They might cringe at the thought of hiring an outsourced CFO or controller. They worry so much about the monthly amount it would cost to obtain this expertise rather than thinking about the entire investment they have made they must protect. As a small business owner myself, I actually can see that sort of thinking. In an article full of quotes from people much smarter than me, let me finish it with one from Tony Robbins.
Most people fail in life because they major in minor things
Tony Robbins
If you would like to discuss your goals and how Krieger Analytics can help your business grow to achieve them, contact us now. What are you waiting for? Phone calls are always free!