Today I thought about my first client as an independent advisor and I figured that even though starting from the basics might not be always the best and most efficient approach, it is definitely a good one.
Businesses that haven’t been wiped out from the market by competition in their early existence are usually ones that besides luck have either a great product or talent in advertising and selling their deal. This brings us to two of the principles I talked about in my previous post: Product and Sales. It is always nice when you have one of them or both and your business is in an upstream, blind for any problems. However, when things are going good it is the most important time to start thinking why they are so good and can they sustainably be kept this way. This is why keeping track of your data becomes extremely important process every business person with a long term goal should consider once he is on the lucky wave.
The experience with my client was extremely insightful. It was a startup seasonal business making a bunch of cash, free of worries about tomorrow. The first thing I looked at was the accounting books and they were lost in a flood. Even though the business did not have reasonable accounting records it was doing quite well. However no information on past performance was easily attainable.
After efforts for gathering information and digitalizing it, the first financial statements were prepared showing some interesting facts about the main resource of the cash and the major outlet of it. The details are not crucial though. What the accounting system has accomplished was to provide relevant and reliable information to the decision makers of the business. Making them better informed and helping them navigate their business through ups and downs. Every long term thinker should use all the available tools and an accounting system is a very powerful one that can help understand your business and prepare it for future events. Without it your business will be just another gambling bet.