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financial accounting course: useful for small biz?

Hi. I have a small 2 person software shop that sells a couple niche products and does niche consulting. The only thing I know about accounting is from reading quickbooks tutorials. Would I benefit by taking a financial accounting course? 

There is one offered at harvard extension school, here is the description with a link to the syllabus:

http://www.extension.harvard.edu/2003-04/courses/10313.jsp

Any tips for a more appropriate course in the Boston area would be appreciated.


Thursday, February 05, 2004

answering myself... maybe I'll just ask my accountant this question. :)


Thursday, February 05, 2004

I find that knowledge of accounting and accounting practices are very useful when it comes to running your own business.  That is if you *want* to know what is going on with your books. :)

Martha Stewart
Thursday, February 05, 2004

yeah. i want to know more about accounting (I never imagined myself saying that!), but am not sure if that particular financial accounting course is appropriate.  However I have not seen a course in the area advertised as "accounting principles for very small businesses".


Thursday, February 05, 2004

What you know from Quickbooks is bookkeeping.

(That's the only word in the English language with three double letters in a row... betcha didn't know that)

Financial accounting courses are likely to be more about reading annual reports and other big picture accounting things that matter a lot more to huge companies than you.

Joel Spolsky
Fog Creek Software
Thursday, February 05, 2004

(Joel - bookkeeping *and* bookkeeper both have three double letters in a row [I checked my spelling on dict.org, since how dumb would I look if I said this and got it wrong?]. )

Pedantically yours,

Exception guy
Thursday, February 05, 2004

I took a similar cource a few years back at UC Berkeley Extension and found it useful. It helped me discuss revenue recognition issues with the controller/CFO where i work, among other things.

pdq
Thursday, February 05, 2004

Will the return on investment be greater than $1200 (the cost of the course) ?  Or should I just buy the book?


Thursday, February 05, 2004

Speaking as a someone who did an accounting major at university, and actually works for a bunch of accountants (I actually used top even spend all my time doing bookkeeping and tax returns!!!).

The only subject that a junior accountant (ie one doing mostly bookkeeping work) relies upon is the ‘Financial Accounting 101’ equivalent. (ie the same as the course that you just mentioned).
This is something I have noticed, and is often comment on by new bookkeepers/part-time uni students  joining our firm.
In an accountants office, when it came to doing the compliance work of a company of your size, the only university subjects needed is that Financial Accounting 101, at least to do the bookwork, it takes a good accountant who has his head buried in books about tax laws to ge you the best tax refund, but that is really the smallest of the issues.
The biggest job in an accounting firm is taking Joe Blog’s pile of reciepts and bank statements that have been stuffed into a shopping bag, or even the attempt the Mrs Blog made of trying to enter the said data into a quickbooks program, when she had no idea that you couldn’t classify this here, or that there, and never ever got her bank reconciliations correct, and went back and made changes to data that had been rolled forward.
I would all but guarantee if you could nail this end, to the point that every account was classified correctly, every receipt was organised, every bank account reconciled, then you would make up the cost of the course in two years just form accounting fees saved.

Once you have tackled this properly, a good ‘Financial Accounting 102’ type course would give you an excellent grounding in management accounting, ie quick/current/gross margin etc ratios that help you gain a good perspective of where you profitability issues in the business are.

I think it is an excellent idea, I still remember the first time my eyes opened and suddenly I new debits from credits, and general ledgers from debtors and creditors, when I could balance my balance sheet, and work out my COGS. In my opinion this sort of course is an excellent grounding for any businessman. Nothing like a *real* understanding of financial to give you an understanding, statements (as opposed to having done read a book or two, even if one of those books is the course book, don’t do it, just take the course).

That of course is my $0.02

Aussie Chick
Thursday, February 05, 2004

 
QUESTION: why would you want to know about accouting? What's your GOAL?

MY answer:

I use that information to help me make the following decisions.

BTW, there's a great article at Inc.com  about this.  It's about the importance of knowing what METRICS to look at to evaulate the condition of your business:

THE MAGIC NUMBER  by Norm Brodsky
http://www.inc.com/magazine/20030901/nbrodsky.html


Here's what *I* use accounting information for:
1.  Are we spending too much money on something?

- You can tell this by looking at trends.  Compare last year to this year.  You're looking for changes.  That might tell you if your office manager is stealing money. The money they steal has to be accounted. They'd try to hide it somewhere (perhaps calling it pizza expenses, whatever)


2.  Which products/services should we expand and which should we cut out (or let them die on the vine).

-You can tell this by looking at how much money each product/service makes for you and how much it costs.

-  If you have limited manpower (who doesn't) you might find that product A is selling twice as much as product B and the same as product C, but A has lower cost (higher marginally profit or "margin").  So... that would tell you to focus on Product A.

3.  Is our business stagnating or growing? (Sales trends).

The real Entrepreneur
Thursday, February 05, 2004

I'm mostly interested in:

2.  Which products/services should we expand and which should we cut out (or let them die on the vine).

I have a good handle on 1. and 3. already, but could always stand to learn more tricks to see if my analysis are correct. 


Thursday, February 05, 2004

Re the previous two posts, this is where you start to want to look at your ratios.

Ie quick ratio, current ratio, Gross Margin, Inventory Turnover, Debtor Days, etc.
Do you guys make use of thse, or do you just (whithout sounding to obnoxious) just make up your own figures to look at?

You may be interested in the following, however I still say these figures are bordering on meaningless unless you can handle the books properly, and I will honestly say most people cannot. With 1600 clients, mostly business clients, a couple of dozen are capable of handling there bookwork to a standard that requires little intervention from us. (Acutally the course mentioned above seems to cover a bit of the managerial side which is what you are after)

http://www.google.com.au/search?q=ratios+quick+current+gross+margin&ie=UTF-8&oe=UTF-8&hl=en&meta=

Aussie Chick
Thursday, February 05, 2004

Yes, I'd agree that you have to make sure you're DATA is accurate.

But, you can get a very good estimate of where things are by looking at data that's pretty sound.

Example:  we can look at things like:

1. Cost of advertising in a certain magazine and income directly atttributable to that magazine.  The trick here is really in being smart about your data gathering.

2.  Sales of an enhanced version of a program.  Did THAT program's enhanced version make enough $$ to justify enhancing OTHER versions?

E.g., we created SPEAKING versions of some of our programs and they sold well enough to convince us to create more speaking versions. Conversely, we translated a program or two into spanish, but the sales were so abysmal that it doesn't make sense to do any more translations.  (This really just highlights a marketing problem: it's hard to market in a foreign language unless you (or your marketing person, at least) speak it fluently.

The real Entrepreneur
Thursday, February 05, 2004

More double characters in a row: voorraaddoosstapel

This is dutch for a stack of storage boxes.

Karel Thönissen
Friday, February 06, 2004

Sometimes I think the only purpose of 'foreign' languages is to make up words for things that we can't see the point in naming in English.

Simon Lucy
Friday, February 06, 2004

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