The first three chapters of Entrepreneurial Finance (2014), according to the syllabus of Ent 650, are not required. However, I would recommend reading them as they provide a lot of great information. It provides an overview of the reasons why entrepreneurs should pay attention to their financial statements. Many entrepreneurs are wholly occupied by their day to day activities and understandably so. After all, they are passionate about what they do and providing the best customer service possible. All are fundamental aspects of running a business. However, knowing your financials is not just for your accounting department.
There is the option of hiring an outside accountant, which can be expensive for a start-up company. Despite this fact, it is crucial to get an unobjective opinion from time to time. A trained accountant can spot irregularities that others that internal employees may not be able to spot.
Since hiring a CPA from an accounting firm is not possible on a day to day basis for most small businesses, many might hire an accountant or bookkeeper for the company. Financial statements need to be reconciled daily, which is a lot of work. Hiring an employee to keep up with the financial statements will allow the business owner to pursue new business and take care of current customers to the best of their ability.
The business owner is still not off the hook. They need to have a good knowledge of what the financial statements are saying and not just the net profit line. Understanding their financial information is vital for two reasons. To an owner that is not paying attention, a bookkeeper could “cook the books” and embezzle untold amounts of money.
The second reason is managerial decisions need to be made based on financial results. If there is a problem with low margins, the cause can be discovered by reviewing the financial reports. Another example is exorbitant expenses can be identified and controlled.
Chapter 1-3 in Entrepreneurial Finance is an excellent introduction to the knowledge that anyone running a business will need to make critical financial decisions.
Rogers, S. (2014) Entrepreneurial Finance, McGraw-Hill Education,
ISBN 978-0-07-182539-9
Master of Entrepreneurship Website for Mike Weimar 