6 Entrepreneurial Accounting Lessons from Warren Buffett
Warren Buffett is known for being the most successful investor in the world and is the Chairman and CEO of Berkshire Hathaway.
Whether you identify with that term or not, as an entrepreneur, you are an investor. You’re time, money and hard work is going into your business with the hopes of receiving a return on your investment. Whatever your desired return is, it is tied closely to your financials.
Here are six quotes from Warren Buffett that apply to your business.
“You have to understand accounting and you have to understand the nuances of accounting. It’s the language of business and it’s an imperfect language…”
Our Thoughts: Entrepreneurs run into a lot of problems when handling their own accounting, not because they can’t do it, but because there is a significant learning curve to be proficient in it. It’s impossible to overestimate the importance of accounting within a business.
“Never invest in a business you cannot understand.”
Our Thoughts: Have you ever heard someone say “I know this business better than anyone!”? Unless they know their numbers and where they stand financially, they don’t know their business. You can only understand a business if you know how the financials impact its bottom-line and potential success. If you are going to invest in your business, you have to fully understand it, and that includes accounting.
“Why not invest your assets in the companies you really like? As Mae West said, “Too much of a good thing can be wonderful”.”
Our Thoughts: This doesn’t only apply to your stock portfolio, but the parts of your business. Invest your time in the areas that you love the most. Not only do you probably know these parts better than others, the enjoyment will help you stay productive and rise above competitors. Delegate what you hate!
“Be fearful when others are greedy and greedy only when others are fearful.”
Our Thoughts: Running a business is not for the faint of heart. Just like in the stock market, when everyone else is afraid to invest, it’s likely the best time to do so. In your business, look for things you can take advantage of that others are afraid of. There may be risk involved, but as long as the potential benefit in your eyes outweighs the potential risk, it’s worth considering.
“An investor needs to do very few things right as long as he or she avoids big mistakes.”
Our Thoughts: This is scary but very true. Of course, there has to be a solid business in place to even get started in the right direction, but no little mistake will bankrupt us. The problem with little mistakes is that they often turn into big ones if they aren’t addressed in a timely manner — like accounting, bookkeeping, overdue accounts payable, etc.
“It is not necessary to do extraordinary things to get extraordinary results.”
Our Thoughts: “If we could just make that one huge sale!” We daydream about that big sale or winning the lottery, but the big changes in our trajectory towards success come from the little things that are done consistently over a long period of time. Just another 15 minutes of productive work each day would turn into an incredible 65 hours of extra productivity in a year! Look for small ways to improve consistently and you will be able to reap huge benefits in your business.
Originally published at kahunaaccounting.com.