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Dr. Kalinda Rose Stevenson
What Is the Biggest Money Mistake In Business?
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I once took a class called “Accounting For Non-Accountants.” The class was taught by a CPA who said that business owners often hand over their accounting to someone else. He identified this as the biggest mistake business owners make in their businesses. Business owners need to understand what is happening with their money. He didn’t mean that business owners need to do the accounting tasks.
Very often, business owners treat money as a distraction from their businesses. They got into business to do something they love and don’t want to pay attention to their finances. In addition, often people act on the idea that, if they do what they love, the money will come.
At another seminar, a charismatic speaker talked about his office manager. He said that he was so grateful that he had found such a wonderful, competent person to take care of his finances for him, so that he could do what he loved to do. He spoke at length about the sense of freedom he had because he didn’t have to think about money in his business.
The next time I took a seminar with the same speaker, he told a very different story. He talked about how heartbroken he was because his wonderful office manager had embezzled more than a million dollars from him. He treated the money as a distraction from his work, and so handed over complete control to someone else. This is the big mistake the CPA talked about. By treating money as a distraction, he missed the essential different between a business and a hobby.
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. 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. At the heart of the matter, the function of business is to make money.
Think about it. Business owners go into business to make money, and yet they often treat money as the most distasteful aspect of business.
From this perspective, it seems very shortsighted to hand over control of the money to someone else. If you are in business to make money, the money is the most important part of your business. The opposite temptation is to get so involved in taking care of the finances that you have no time or energy left over to do what you love.
This leads us to the question: What do you do about money in your business? The lifeblood of your business is money and knowledge of money is power. The fastest way to give up power in your business is to give control of your money to someone else.
Unfortunately, business success requires you to know what is happening with money in your business. You can never find the royal road to business success that will allow you to simply hand off all knowledge and responsibly about money to someone else. In the worst cases, you are at the mercy of embezzlers and incompetents. In the best cases, you’ll never feel completely in control of your business, as long as you don’t understand what is happening with the money in your business.
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.
Kalinda Rose Stevenson, PhD.
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