Did you know that the word accountability derives from accounting?
Although finance and accounting may (for some) be quite daunting concepts to approach, it is important to understand the benefits of understanding basic financial management skills for business purposes.
A recent opinion article beautifully explains the origins and deemed importance of accounting in capitalist society from a historical point of view. For example, “In Renaissance Italy, merchants and property owners used accounting not only for their businesses but to make a moral reckoning with God, their cities, their countries and their families.”
A basic understanding of some of the following concepts are in fact vital to business success:
Learning how to read, understand, interpret financial statements is crucial to the sounds running of a business, getting investors interested and managing risk.
Furthermore, understanding basic accounting concepts, such as the relationship between profit and cash will enable sound business decisions, drive up performance and increase effectiveness.
Today, we are a part of a society which has passed responsibility onto experts, which means that much of the wider population is unfamiliar with basic accounting and finance skills. This is quite a shift from the past as for instance in the 1500s in the Netherlands, most of the population knew how to do double entry bookkeeping. In fact, “Not only did the Dutch have basic financial management skills, they were also acutely aware of the concept of balanced books, audits and reckonings. They had to be. If local water board administrators kept bad books, the Dutch dyke and canal system would not be well maintained, and the country risked catastrophic flooding.”
Perhaps it’s time to put double entry bookkeeping back on the agenda if we want to be a part of an accountable society?
Check out our finance training courses coming up.