On the next few pages, we'd like to give you the opportunity to learn a little about accounting.

We know that it isn't considered the most glamourous subject in the world, but a little knowledge may help you talk to those strange creatures - accountants.

1. Why do we have accountants?

2. What about cash flow?

3. A whirlwind tour of accounting

4. An example

5. Summary

What is a company there to do?

If you were to ask a typical person in easyGroup (one of the companies in which we have worked) this question, they might say "We transport people by plane" or "We rent cars to people cheaply". If you asked someone from Proctor & Gamble they might say "We make soap/cosmetics/detergents".

Although I'm reluctant (unlike most consultants) to tell people their job, they would be wrong. What all commercial companies exist to do is to make.....MONEY!

In a simple business knowing whether you are making money is fairly easy - if you buy and sell on the same day and deal only in cash, then if you have more money at the end of the day than at the beginning, then you have made a profit.

Most businesses, however, are not like that. They buy and sell using a variety of credit terms, they hold stock and they add value to the stuff that they buy by processing it in some way, spending money on labour and materials.

So, if you want to know whether you are making money or not, you need somebody to make loads of adjustments to the cash transactions and work it out for you. For the sake of this article, let's call these absolutely indispensable people, accountants.

So now you know why companies have accountants....or at least, why they should have accountants....or at least what accountants should be used for most profitably.

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"Making things as easy as"

 

Attwood Business Consultancy Ltd