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I once took a daylong course called "Accounting For Non-Accountants." The CPA who taught the class said business owners don't need to do all of their own accounting, but they do need to know what is happening with their money in the business. He said that the biggest mistake business owners make is to hand over the accounting to someone else. Many business owners get into business to do what they love to do. Paying attention to money feels like a big distraction, and they are eager to let someone else take care of it. People who get into business to do what they love can also be influenced by the idea that money will come if they do what they love to do. I also attended a seminar featuring a charismatic speaker. He could command the audience with the power of his personality. During the course of the seminar, he talked about his wonderful office manager. He talked about what a gem she was and what a gift it was to him that he had someone so competent handling his finances so that he was free to do what he loved to do. Less than a year later, I took another seminar with the same charismatic speaker who talked about how heartbroken he was. He had recently discovered that his wonderful office manager had embezzled more than $1 million from him. This brilliant speaker had made the mistake so many business owners make. He had handed over complete control of his finances to someone else, thinking that money was a distraction from his real work. In the process, he missed the fundamental difference between a hobby and business. The function of business is to make money. The IRS has criteria to determine whether you have a hobby or are running a business. The difference concerns whether or not you make money with what you do. When you have a hobby, you can do what you love and forget about the money. When you start a business, forgetting about the money can be the quickest path to business failure. Isn't it ironic that the one thing that stands between doing a hobby and running a business is money and yet the one thing many business owners find most distasteful about being in business is handling the money? When you stop to consider that the reason to have a business is to make money, it seems very shortsighted to surrender the most important part of your business to someone else. The other extreme is to spend so much time keeping track of the finances, paying bills, and doing data entry that there is little time or energy left to do what you love. So what do you do about the money? Money is the lifeblood of your business. And knowledge of money is power. When you give up control of your money to someone else, you're giving away your power as a business owner. What happens when you hand over knowledge and responsibly over money to someone else? In the worst cases, you are a potential victim of embezzlers and incompetents. In the best cases, you will never be completely in control of your business as long as you don't understand what is happening with money. Regrettably, there is no royal road to business that allows you, as the business owner, to leave money to others. So what is the solution? The solution is to understand clearly that control of the money coming in and going out of your business is your responsibility. You don't have to get involved in doing the details of bookkeeping, but you do need to understand the data. If you are in business, your business exists to make money.
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