The Difference Between Accounting and Finance

Many family business leaders use “accounting” and “finance” interchangeably, but these are entirely different disciplines. Not knowing that difference will limit your ability to grow and prosper. Listen as Wayne shares his thoughts – and please share your comments below.

Hi this is wayne rivers at the family business institute thanks for tuning in we are excited to bring you this blog a couple quick things we’re interested in your comments so click the button below and let us know what you’re thinking the other thing we’re interested in is suggestions for future blogs what are you interested in what are we not covering in our

Blogs you know what what would really grab your attention is something you think really needs to be talked about in the context of family business and one other aside quick commercial we are in the talent acquisition mode right now we are looking for a man or woman who is a terrific sophisticated successful business person to work with us running one of our

Peer groups one or more of our peer groups specifically we have found that people who are maybe sold their businesses or somebody whose career is winding down and they’ve turned the business over to another family member people who are super successful are really good facilitators of groups of other super successful business people so we’re in the talent hunt

And we’re looking for someone who kind of fits that mold who would be interested in running some of our peer groups for us so if that sounds like you let us know give us a buzz and let’s talk about it we can get into more detail later so today’s blogs one of my pet peeves one of the things that we talk about in our family business crisis our newest book is

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The difference between accounting and finance okay because most people in business especially small business use the terms interchangeably accounting or finance okay they are not the same they are not the same and we in a rather heavy hinted way i kind of made that point in this particular book but let’s think about what’s the difference between accounting and

Finance so when you think about accounting you should be thinking about the accuracy of your financial transactions ar ap payroll collecting money reconciling stuff at the end of the month all the compliance reporting and of course taxes i’m by god family business leaders are the most obsessed people about taxes the tax tail wags the dog all too often when it

Comes to we businesses don’t get me started on that all that stuff all that all those topics that i talked about really have to do with compliance i mean you’re complying with rules you’re putting the right number in the right box on your tax return that kind of stuff you’re tracking the day to day ins and outs of inflows of money in the business okay it’s i

Don’t want to say it’s bookkeeping but a lot of it is bookkeeping okay now let’s talk about finance finance is different finance is budgeting strategy analyzing growth and how it’s going to affect your finances key performance indicators or kpis you’ve heard us talk about that before planning for the future troubleshooting if i buy this piece of equipment or we

Open an office in this city what’s what’s it going to do to us in terms of our our pl and our balance sheet and how long is it going to take to recover our cost etcetera etcetera it’s analysis okay so if you think about what i talked about with ap and ar and compliance on the one hand and then budgeting and strategy and growth and forecasting on the other hand

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You see the difference between accounting and finance accounting has to do with what has happened in the past how do we code this money that came in last week so it fits into our financial system easily finance on the other hand looks forward right so big difference there finance is forward-looking accounting is backward looking past versus future we are really

Good at the past you had a good year last year right you made a lot of profit last year terrific how does that help me now that time it has come and gone there’s not a blessed thing i can do about it even if we had a ride year at this point there’s nothing i can do about something that happened 1231 16 so what i need to be focused on is the finance as a business

Person i need to be focused on finance and that’s where we should be focusing as leaders in family businesses now if depending on where you are in your family business life evolution you have accounting in place accounting always comes first because you’ve got to do that stuff you’ve got to track all that stuff and nobody wants to go to jail because they didn’t

Make their payroll taxes on time right so you probably have a good team in place to do your accounting and focus on the past and get everything right from compliance and accuracy standpoint i’ve seen this and it’s epidemic we talk about it quite a bit here it’s epidemic among family businesses they’ve got an accounting team in place and the business grows from

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Five million in sales to 30 million in sales and they say you know what used to be our controller now you’re our cfo same person and that person didn’t wake up smarter or better or more sophisticated just got a different title and maybe a pay increase there’s not many cfos out there in family businesses i don’t know what you call yours there’s not many cfos

Out there and family businesses that a lot of times people call them cfos or controllers heck they’re barely bookkeepers so if your family business has grown from five to twenty five or twenty five to seventy five million in annual sales you really really really need to start thinking about getting a true cfo getting somebody who can analyze the future of your

Finances finding people to do bookkeeping a dime a dozen accounting schools are graduating people every single year dime-a-dozen cfo’s people who can forecast the future and be a partner with you in terms of strategy and intellectual firepower those people are pretty rare and that’s what you need to be looking for as you grow and make your family business more

Prosperous this is wayne rivers at the family business institute thank you you

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The Difference Between Accounting and Finance By The Family Business Institute