If you’re freelancing, running your own studio or startup, you really need to understand three financial statements:
- Balance Sheet
- Profit & Loss
The easiest way to do this is to switch to an accounting tool that you can use whenever you want, without asking your accountant/bookkeeper to send your reports. It’s imperative that you can log in whenever you want, poke around the books, and annoy your accountant with a lot of questions about what’s happening with the numbers.
We use Xero and I freaking love it. The scary truth is I didn’t truly understand our Balance Sheet or P&L until we switched recently. Since we moved from QuickBooks to Xero, I’ve learned a tremendous amount about what actually makes our company valuable and what really affects our profitability.
The problem is that most of us in the web industry are creative people. Crunching numbers (especially boring things like ‘Amortization’ or ‘Accrued Expenses’) seems almost hawkish – too focused on money and profitability. Based on my seven years of businesses, you just have to get good at it.