Originally published on February 27, 2019 as part of the Boosting Resilience project

Accounting is a form of communication. It is a language. A way of understanding the flow of cash. The double entry standard of balancing books. And the biggest secret of all?

It isn’t difficult to get to grips with. You just need someone guiding you through the basics.

That is exactly what we got with ‘Practical Accounting and Finance for Entrepreneurs‘, a new day-long masterclass in the basics of accounting with Stefano de Cesaris, who expertly, and with a surgeon’s precision but a true teacher’s kindness, took our group through the quagmire of the HOW, WHAT and WHO of accounting: the language and procedures, the numbers as they describe the behaviour of a business over time, and the internal and externals users and the lenses through which they see and read these numbers. The gift of a place granted to me by Cass Business School, as a ‘Boosting Resilience‘ participant, came at the perfect time, and I strongly feel it ought to be taken by all managers and senior staff in the creative sector.

Throughout the day, we kept returning to the idea that as a leader, or someone with strategic oversight in a business, it’s important to understand what is being described in each area of accounting, the better to manage our businesses. In simple terms, these are:

• Financial position: what we own, & what we owe as at a given date (BALANCE SHEET)

• Financial performance: Are we creating value? (P&L, CASH FLOW)

In many ways, these are things that many of us at strategic level have always had to deal with, yet I know that certainly in my sector, tasked with drawing up a basic balance sheet, or following cash flow to calculate equity, many of those with supposed financial oversight would baulk. Why is it that in our sector, thriving, creative, and commercially successful as it is, we are often afraid to tackle the nitty gritty of financial paperwork? Too often we rely on the ‘finance’ person on our Boards to take care of that, or assume that it’s the accountant’s job.

As I see it, every member of the team should have a basic understanding of accounting, because every member of the team should be engaged in the growth of the business. The ethos and message of a business, just like the financial paperwork, is a language, and if everyone sings from the same hymn sheet, then that business can work like a well-oiled machine. Growth, of course, might be defined in any number of ways, but every business has a financial infrastructure, and a better understanding of it can only lead to it being better run, better monitored, and with a better sense of motivation when it comes to tracking performance.

In the charities sector, particularly with recent scandals hitting the news, this additional level of accountability is incredibly important. For entrepreneurs, often striking out alone and setting up an entire business from scratch, that understanding, coupled with a grasp of regulatory requirements (also covered in the workshop), it’s essential to their business’s survival.

Do you know if your business is liquid? Or what ‘creditors’ and ‘debtors’ mean on the balance sheet? Or the difference between current and non-current assets? And would you understand it if I said that the fundamental accounting equation upon which all calculations and forecasts hinge, always, is ‘A = L + E’? Honestly, by the end of the workshop, if you’re not considering tattooing the formula to your body, or at least framing it somewhere for your office wall, then I’ll eat my imaginary hat.