Finance skills are essential for any business owner

Understanding basic finance skills can help business owners get more from their accountant, making the difference between success and failure. In the first of a three-part series focusing on skills to run your own business, we look at small business success stories.

No man is an island, or so the saying goes, but, in the world of work, more and more of us seem to want to be. Who hasn’t dreamt of running their own business and being their own boss?

In a world transformed by advancements in digital technology, it’s hardly surprising that there are more budding entrepreneurs. In 2013 alone, 526,000 new businesses were registered, up from 484,000 in 2012.

Whether you’re an aspiring plumber, beautician, writer, graphic designer, window cleaner, child minder or dog walker, the barrier to entry is the same – knowing how to set up and run your own business is not as easy as many think.

Having a passion is one thing, but to have a flourishing business means you need to understand all elements of the business model.

Around 50% of small businesses fail in the first two years. It’s a statistic that might give people pause for thought before they decide to branch out on their own.

Yet, with the right tools, there is no reason why great ideas cannot be turned into thriving businesses.

And help is at hand. AAT has launched a suite of qualifications aimed at giving people the chance to study finance and accounting qualifications that suit their individual needs.

Here we meet Tessa Turnbull, owner of a small business, who, has realised the value of gaining some financial and accounting know-how.

Tessa Turnbull runs I Love Keswick, a gift shop in Keswick, Cumbria.

“When the opportunity arose, I jumped at the chance to open my gift shop. It was my business’ first birthday in July.

I had already studied with AAT, as I wanted some finance knowledge – it always goes down well on CVs when looking for work! Little did I know that this knowledge would be so useful for my own enterprise. I can honestly say that, without my accounting skills, I would be lost.

When I handed my books over to my accountant in September, they just gave them back to me and said: ‘You’ve done everything – there’s just the year-end to finalise.’ I know how important it is to get it right, down to the last penny.

When I worked in admin, I used a computer program that does everything for you. But, as you just input the data, I didn’t understand the process fully.

When running your own small business, you might not be able to pay for the software. As a small-business owner, you need to understand the data you put into the computer software, as you need to understand your income and outgoings.

You need to know that everything adds up.

If you can’t do these things yourself, particularly preparing your year-end accounts, you’ll have to be ready to pay someone else a lot of money to do it for you, which is painful. My accounting knowledge has already saved me a lot of money. This is a cost that many businesses don’t budget for.

And it’s nice to be able to use my accountant for a higher level of expertise. If I hadn’t known what I know about accounting, would I have had the courage to go into business? Probably, yes. It’s what I’ve always wanted, and I would have just got on with it.

But I would have made a lot more mistakes. My financial skills come in useful every day. I’m so grateful I invested in them.”

Check back in next Wednesday for part two of the series.

Take a look at AAT’s business skills qualifications here and AAT’s bookkeeping and computerised accounting skills qualifications here to get a head start on your business accounts.

AAT Comment offers news and opinion on the world of business and finance from the Association of Accounting Technicians.