As accountants, we sing the praises of our industry.
We think accounting can have a massive (and positive) effect on your business and most people do not know about the various ways accountants can help a company to grow.
So, when we hear of successful business owners that explain how great accounting has helped their business, we love to share the news.
Because sometimes it is better to hear advice from someone in the trenches of business.
So, in this article, you will learn financial tips from the co-founder of a business now worth £1.9 billion.
You will hear what he advises you to do and what steps to take to make sure your business grows.
It All Started With A £30,000 Loan
James Watt and Martin Dickie started Brewdog (a craft beer company) with a £30,000 loan and a strong self-belief that it would work.
That was in 2007.
In 2018 the business is valued at just under £2 Billion, and they have recently recorded sales of £72 Million with £3 Million profit.
With such incredible growth people became interested in just ‘how’ they managed to grow the business at such a rapid pace, and in 2016 James Watt published ‘Business For Punks’, his guide to the creation of a business ‘The Brewdog way’.
The book is a treasure trove of advice, but it was the financial advice that really stood out for us (you will see why next).
Know Your Numbers
Most business books are full of stories of success and risk, and while Watts does make sure he tells you about this, he actually has devoted a massive section on finance.
The golden rule he promotes (and one we agree with) is to ‘Know your numbers’.
Watts makes it clear that without knowing your numbers you are not going to be able to grow your business.
He states:
“You can’t build a business without making some monumentally stellar decisions. And you can’t make monumentally stellar decisions without properly evaluating your options. And-you guessed it-you can’t properly evaluate your options without fully understanding the financial implications of those options”.
He goes on to give 6 pieces of advice on things you should focus on as a business owner.
- Customer Payment Terms: Keep credit terms tight and enforce them with an iron fist.
- Supplier payment terms: agree the terms and always pay them on time.
- Get trade customers on direct debit: that puts you in control, and they pay when you say.
- Have flexible banking facilities: an overdraft offers much more flexibility than a loan.
- Do daily bank reconciliations: To ensure you stay on top of things.
- Pre-load the account for bigger costs: like monthly payroll and capital expenditure projects. You need to ensure you have the cash to fund your growth.
Advice and wisdom from a successful business owner is hard to ignore but if you are reading this and thinking’ sounds great but how do I do all this?’
Well, this is where we come in.
Practical Accountancy Through Monthly Management Accounts
James Watt says that you MUST keep your eye on your numbers, but when it comes to the running of a business we understand that it can be tough to achieve this.
From payroll, human resource issues, sales and of course marketing.
A business owner is a ‘plate spinning master’.
So how do you do it all?
Well, luckily James Watt spills the beans on his secret weapon, monthly management accounts.
Watts states:
“Monthly Management accounts give you a chance of staying in control of your business. Without them, you are already a lost cause. You definitely won’t change the world by doing monthly management accounts, but you sure as hell won’t change it if you don’t.’
Watts could not have put it better.
Monthly management accounts (a service we offer) provide a way for you to understand the financial situation of your business in near ‘real time’.
They are simply the best way for you to keep track of your business finances.
“But My Business Is Not Big Enough”
If you are reading this and thinking ‘hey Brew Dog is huge, my business is nowhere near that big so I don’t think monthly management accounts would be useful’.
Well to this we say, ‘a business of any size can benefit from management accounts’.
It is not about the size of our business it is about the health of your business.
In fact, James Watt says:
“Think of it as a health check for your business, and preventive medicine is preferable to emergency surgery.”
No matter how big or small your business is, regardless if you are the only employee or there are 100. The health of your business matters.
Management accounts on a monthly basis help you to stay on top of the health of your business, and this means that your business can stay alive.
You will also be able to learn if your business is strong enough to grow or if you need to take a step back and re-plan your current business model.
Conclusion
Business For Punks is an excellent read and covers many different areas of business.
However, the financial section struck a chord with us, and it is great to see a business owner giving such sensible advice.
As Warren Buffet once said ‘accounting is the language of business‘ and it is essential that you learn to speak it.
Or at the very least hire an accountancy team that can translate it for you.
Monthly management accounts can help your business to grow and survive uncertain times and if the owner of a business worth nearly £2 Billion recommends them as well, you know it makes sense.
Get in touch to discuss how our services can help you.