Accounting Systems – Are They Demons in Disguise - Managing You?

By: Sandra Simmons


Most business owners have a terrific, on-going, love-hate relationship with their accounting system or its software. The reason for this, in my opinion, is that accounting systems actually have a dangerous little betrayal mechanism built into them that is secretly masked as something that is “supposed to help you.”

What is this betrayal? Accounting systems cannot tell you how to manage your money to your best advantage. They only tell you, after the fact, if you did well or made mistakes. This means the agreed-upon financial system that we rely on to help us, only has the ability to tell us what happened in the past - not how to handle our money in the future to fix money management mistakes and get better results.

You might think the subject of accounting seems complicated and mysterious. Accounting is simply recording what occurred after money came into a company or a household. It keeps track of how much money came in and where that money was spent; pure mathematics, no thinking involved.

Any standard accounting system is actually a look back into the past. It tells you how much was made or lost, and how much money is currently owed. While this is important to know, it can put the company or individual in a position of being controlled by the money - always making financial decisions based only on how much money is left in the bank.

On the other hand, financial planning is done by looking toward the future. Planning occurs BEFORE the money comes in and BEFORE it is spent. This puts the company or individual in control of the money. If you can control the money, then you can control your financial future.

Planning how to get in more income and implementing those plans is essential for everyone. Nothing stays stable for very long. It either goes up or goes down. Income is at the mercy of this natural law. An individual or company has to continue to push income up, while cost of living increases, rising prices and taxes eat away at income growth.

To be profitable and create wealth, reducing expenses so you are operating within your income is sometimes necessary. But, be careful to makes sure you don’t cut expenses in areas where it would reduce your ability to produce income. Careful spending on items that bring more money back in than was spent is the goal for responsible financial planning.

Many business owners make the mistake of cutting back on marketing and promotion when that is the only way they will get in a constant flow of new and repeat customers. Using existing cash and resources in a way that prevents waste and generates more income is vital. All of these actions require planning before doing. That is operating in the future. Thinking is definitely required.

Where did all the money go? Your accounting system tells you that.

How much money will be coming in? How can it best be used to increase the long term survival potential of a household, company and the individuals in the group? The answers to these questions require frequent, consistent, and careful financial planning and money management.

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Sandra Simmons, President of Money Management Solutions (www.MoneyMgmtSolutions.com) has years of experience helping business owners and individuals manage their money to make profits and create wealth. Find out how you score in managing your money using the FREE Money Management Score analysis tool (www.ezine.MoneyManagementScore.com)

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