How to understand your accountant
IF YOU don't know how to understand your accountant, now is a good time to start thinking about it!
We're almost halfway through July, so if you haven't already booked an appointment with your accountant, chances are it's going to happen.
I'm not talking about touchy-feely understanding, but understanding the numbers that accountants love to produce.
These numbers tell a story about your income position and possibly your wealth creation process - and you need to know how to understand your accountant to make sure you get maximum value from the money you invest in their services every year.
I often hear people say, "I don't need to understand my accountant - that's why I employ them!", but unfortunately, this has caused many problems, particularly for business owners.
You should know your financial affairs, even at a broad level, so you don't need to know the nitty-gritty to get value from the reports your accountant produces. It's okay to delegate the accounting function, but you can't delegate responsibility for your financial decisions - and accounting reports will help you make better decisions.
Accountants have previously done a great job of convincing people that finances are complex - but I've got a surprise for you. It doesn't have to be that hard! If you can keep track of your household finances, you can understand more complex accounting reports.
Like most things, it will take some initial effort to learn the basics, but once you have mastered that, you will be able to have an intelligent conversation with your accountant. Won't that be fun?
So, how do you understand your accountant?
1. You need to overcome negative feelings regarding accountants and their reports.
Most accountants are nice people (just misunderstood!), and can be very helpful. You need to set a goal to develop a positive relationship with your accountant. This has to be your decision, and you will find that it's a win-win situation at the end of the day.
2. Do your homework.
As I said above, you do need some basic understanding, but it is basic and definitely achievable by nearly anyone.
You do not need a detailed understanding of the processes of turning raw financial data into accounting reports.
All you really need is to understand the end result, which normally will be a tax return or a profit and loss statement and balance sheet. Once you have mastered these, you can graduate to budgets and cash flow reports.
So where do you go to get this knowledge? If you've passed Step 1 and already have a good relationship with your accountant, the obvious answer is to ask them. If not, the Internet provides a wealth of information at your fingertips - just make sure it's an Australian-specific site.
The important thing is to do something, and work towards understanding your accountant.