College is a time for developing skills, relishing new experiences, and of course, navigating the joys of sharing an apartment with random roommates. We get to learn about ourselves and begin to shape our future identity. If we feel particularly ambitious in college, we enroll in accounting classes. Immersed in the creeds of liabilities, assets, equity, expenses, and revenue, we begin to see money in a whole new light. For most accounting students, these topics are principles and haven’t yet reached the level of actionable knowledge. Case in point: an accounting teacher could be teaching a fascinating lesson on expenses, and half of the students are nodding their heads in agreement even though they’re still on their parent’s auto insurance policies and have never dealt with a major expense in life.
The Necessity of Experience
Basically, it comes down to experience. Until you start a business, fumbling and bumbling your way through the early stages of the process, you’ll never master the nuances of finances.
“In high school and college, most students learn a lot about geometry and calculus but very little about taxes and investing,” recalls financial expert N’dea Yancey-Bragg. “In fact, when tested on financial concepts, only 17% of respondents ages 18 to 34 demonstrated basic financial literacy, according to the FINRA Foundation’s 2018 National Financial Capability Study.”
Yikes! Financial literacy is crucial for more than just business ownership… it’s necessary for successfully navigating this thing we call life. And it’s a shame that so many college graduates, some of whom likely took accounting classes, lack the skills to thrive.
5 Accounting Ideas You Might Have Missed in School
There are some amazing accounting teachers out there. And there are some equally amazing students (I’m assuming you were one of them). Despite this combination, there are still crucial lessons you just can’t fully learn and appreciate in the classroom.
Ready to see our top 5? Drumroll, please…
1. Accounting Requires Relationships
Maybe you’ve heard this old joke: What’s an extroverted accountant? One who looks at your shoes while they’re talking to you instead of their own.
Some accountants certainly prefer solitude and work best in a private office. And that’s A-OK. But when done right, accounting is a team sport. There needs to be ample collaboration between all relevant parties. Trust is required all around, and building trust takes a personal investment of time and effort.
So don’t plan on being a lone wolf. You’ll need to reach out to others, ask questions, and make friends.
2. People Won’t Pay You Unless You Make Them
Your accounting training often focuses on how to handle payments, but it doesn’t teach you the simple fact that many people in this world won’t pay you unless you follow up and make them do it.
And we’re not talking about just shady people here. Many good folks (the kind who coach their kids’ soccer teams and volunteer at their local food bank) will either forget or willfully ignore their responsibility to pay you.
So you need to have a plan for collecting payments. And you need to follow it.
3. Passive Income Is the Holy Grail
There are plenty of ways to make money as an entrepreneur. Some of the work is of a very functional variety—you do a series of tasks that will earn you a prescribed amount of money.
But passive income laughs in the face of traditional income. Why? Because passive income is constantly an option and the possibilities can be endless. Let’s say you’re selling an e-book on your website. Once you’ve done the work to create the book and set up the sales page, it can make you money while you eat, sleep, or go to your daughter’s ballet recital.
Look for every opportunity to automate your revenue. Because working for a dollar is never as enjoyable as sleeping for a dollar.
4. You’ve Got to Balance More Than Your Books
Business and accounting classes can present exciting scenarios for future small business owners. And while those dreams can indeed become a reality through hard work, they also can destroy lives if they aren’t balanced in a healthy way.
Remember that you’ll get further and have a more enjoyable journey if you take time to relax, go fishing with friends, try out that new sushi restaurant, or visit your grandma. There’s no prize for the most voracious hustler, but there are plenty of examples of such individuals who burned out early due to their unsustainable pace.
5. Follow Up, Follow Up, Follow Up
Finally, it’s worth noting that very few things in business happen effortlessly the first time. Go ahead and set your plans in motion. But just be ready to follow up at least 11 times throughout the process. A good follow-up is usually needed to progress to the next stage of any plan.
Seeking Lessons Beyond the Classroom
There you have it! These 5 lessons are bound to come to everyone who jumps into the business world.
How about you? What have you learned as a small business owner that doesn’t get taught in business or accounting classes?