Many new small business owners rely solely on their bookkeeper or accountant to explain their financial statements to them. While nothing can replace the advice of a skilled financial advisor, having a basic understanding of important accounting concepts can give you peace of mind and confidence you’re making the right decisions in your business.
The easiest way to gain this understanding is by reading accounting books, but which books should you read?
Hundreds of accounting books for small business are available, and new ones are being published at an astounding rate. Not all of these books are well written or easy to read, however, and you can quickly spend your entire continuing education budget on subpar texts.
To help you avoid spending your money—not to mention your valuable time—on books that might not be of value to you, I have compiled this list of the five best accounting books for new small business owners.
This list includes a mix of classic technical texts, as well as more contemporary, conversational books, all of which will get you up to speed on the important accounting concepts in your business and how to leverage them to increase your bottom line.
Courtesy of Amazon
Are you convinced there is nothing simple about the numbers in your business? Are you at a loss as to how to start using your financial statements to run your business? Have you ever had anyone tell you paying taxes is a good thing and thought they were pulling a prank on you?
Greg Crabtree has more than 30 years of experience as an accountant, so he’s definitely fluent in the language of accounting. However, he doesn’t hide behind industry jargon in his book. Instead, Crabtree uses practical examples and step-by-step instructions to use your numbers to guide your business to profitability. There’s also a good measure of “tough love” thrown in there to help you take decisive action. For free resources to support the teachings in the book, go to the Free Tools section of his website, simplenumbers.me.
You need to have a fundamental understanding of how your financial statements (profit and loss statement, balance sheet, and statement of cash flows) work together to fully understand some of the later chapters in Simple Numbers, Straight Talk, Big Profits. If you need a primer on this, check out numbers 2 and 3 on this list.
Courtesy of Amazon
Do numbers scare you? Have you ever found yourself making excuses to cancel your meeting with your accountant, because you just don’t understand your financial statements? Are you, in a word, numberphobic?
We avoid what we fear, and we fear what we don’t understand. Fortunately, Dawn Fotopulos has written this easy to read book, which explains how your three key financial statements—the profit and loss statement (or the net income statement, as Fotopulos calls it), the statement of cash flows, and the balance sheet—serve as your business’ financial dashboard, and how those financial statements work together to help you steer your business. Her simple explanation of these complex concepts will have you understanding your financials in no time, and you will start looking forward to your meetings with your accountant!
Fotopulos also explains how the very things you are doing to help your business might be hurting it. For example, did you know an increase in revenue can actually be detrimental to your business if you don’t manage the rest of your finances properly? The case studies included in Accounting for the Numberphobic help bring these concepts to life, and the book includes plenty of action steps to help you steer your business into more profitable waters.
This is the go-to volume on my shelf when I have difficulty explaining a concept to a client. Though one of the more technical books on this list, Finance for Nonfinancial Managers is still jargon-free and very readable.
The target market for this book is managers in larger companies, but plenty of practical information will benefit small business owners, too. Like Accounting for the Numberphobic, Greg Siciliano’s book provides a primer on balance sheet, income (profit and loss) statements, and statements of cash flows, but it also delves into other financial reports you may find helpful as you grow your business.
Heavy emphasis is placed on cost accounting, a critical concept to understand in order to maximize your profitability. Cost accounting can be difficult, but Siciliano simplifies it so it’s not intimidating.
The format of Finance for Nonfinancial Managers makes it an ideal reference book. Key terms, warning signs, examples, and tools are flagged by symbols and boxes, making it easy to quickly locate what you are looking for as you skim the book.
Psychology tells us humans learn best through play, and The Accounting Game makes learning accounting concepts and applying them to your business seem like … well, a game.
Darrell Mullis’ book is deceiving in its simplicity—even the cover leads the casual browser to assume the book belongs with the children’s books and not with the “serious” accounting texts. As you read it, you might forget accounting is supposed to be boring. Before you know it, you will have a better understanding of accounting and how it applies to your business.
The Accounting Game, as is the case with most of the other books on this list, is interactive and includes step-by-step processes you can implement in your own business. The story format makes it easy to read, and you’ll find yourself cheering as your lemonade stand grows into a profitable enterprise.
Walking away from this book, you might be tempted to wonder, “Why can’t it be that simple in real life?” And then you will realize, it actually can be.
If you’ve read the other books on this list, by now you likely know the basic accounting equation Sales – Expenses = Profit. This puts profit last, making it an afterthought and something that may eventually happen someday, if you do everything just right and have a fair amount of luck. Profit First flips this equation on its head, making it Sales – Profit = Expenses.
Profit First is not an accounting book in the strictest sense of the term, but it tackles the challenges of cash management beautifully. Instead of focusing on reading your financial statements, Mike Michalowicz outlines a method to help you manage your cash using multiple bank accounts, a take on the old “envelope method” your mom likely taught you when you got your first paycheck. Your accounting will stay the same as it always has, but if you employ the Profit First method in your business, you will make your paycheck and your profit a priority rather than an afterthought.
In his unique, conversational tone, Michalowicz draws you into the book, making it seem more like a leisurely read than a business book. You might be tempted to keep reading to the end and not stop to implement the action steps outlined in each chapter. Fortunately, the book is readable enough you can go back through it a second time, pausing to download the free resources available on the author’s website, mikemichalowicz.com.
You might have noticed there is no basic “how to do your own accounting” book on this list. There are two primary reasons for this.
First, as a business owner, you’ve got many things to tackle with your limited time, and the day-to-day accounting is not one of them.
Second, most accounting is now done using cloud-based accounting software, which changes several times a year. This often makes traditionally published books obsolete before they are even printed.
If you are looking for a resource to help you do the bookkeeping and accounting in your business, I recommend taking an online training course that incorporates the basics of bookkeeping with the how-tos of using your software of choice.
With so many things to do in your business, you might not think you have time to read. Each of these accounting books for small business is short in length and easy to read. By setting aside 30 minutes to an hour each day, you can quickly consume the books on this list, extract the information most valuable to you, and implement any action steps you desire.
I recommend keeping a pad of post-it notes close at hand to jot down thoughts and ideas you want to revisit later, and stick those notes on the pages detailing these concepts as you read. These notes will serve as semipermanent bookmarks and save you valuable time when you revisit the book.
The immediate benefit of reading the books on this list will be a greater understanding of the financial state of your business. The long-term benefits include increased profitability, cash flow, and growth. Investing the money in purchasing a few—or all—of these accounting books for small business and the time in reading them might be the activity with the highest ROI in your business this year.