Today we have a special treat. Our friends over at the Business Development and Entrepreneurship Club, Irvine are letting us reprint one of their recent articles. This particular article was written by Paul Fairfield and it’s full of ruminations on accounting and it’s relationship with entrepreneurship. After you are done reading this article you should check out this post we previously republished from BDEC.
Accounting and Entrepreneurship – Joined at the Tongue (Not in the Gross Way)
I have long regarded accounting to be the language of business. We hear it all the time. Whether you talk to a business owner, a CEO, or an investor; whether the business is a service, a manufacturer, or a retail outfit; it’s always all about the emotionless “bottom line.”
I love that term. I love it in part because it’s so ambiguous. The bottom line for one person could be Net Income, for another, Net Worth. It could be EBITDA, ROI, or EPS. But no matter what it could be, the bottom line always is a number. It’s a number that was calculated, reported, and verified by accountants. Marketing tries to predict it, operations tries to create it, finance tries to affect it, but accounting determines it.
I also love the term because, for all its ambiguity, the bottom line is what business decisions are made of. Every loosey-goosey product design, every fluffy marketing campaign, every fuzzy idea, is boiled down (by accounting) to a cold number that businessmen use to take action, to go, to stop, to buy, sell, wait, for how long, or how much.
Entrepreneurs are those who take the fuzziest ideas and turn them in to clear financial models. The really talented ones do this automatically, but most have to work on the translation from English to business. It is in the community of entrepreneurship where new business is born, where new wealth is generated, and where the bottom line is the top of everyone’s list. And, yes, where business is spoken conversationally. It should be no surprise then, that accountants who join this community fit right in because they are already fluent in the local language.