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Accounting Needs

Accounting Needs

Accountants take care of the money side of a business, but if you have a small business, can you afford the services of an Accounting Firm? Sadly there seems to be a trend among accounting firms to boost their revenue by focusing on larger businesses, thus neglecting the small business sector. Even if they 'lower their standards', to accommodate such an 'insignificant' client, their inflated fees are making it more and more difficult for small business owners to justify their services.

Some business owners resort to desperate measures and dump what they have on some poor bookkeeper’s desk and hope a miracle will happen. Even if you do this, you are at the very least – 12 months behind knowing if your business is doing OK.

Here’s a true story –

When I was young lad, long before computers and accounting systems were even thought of, I met a very wealthy farmer. He was explaining his business to my dad. In each of his back pockets, he had a small notebook – the type that had a wire spiral, so it is easy to flip the pages. In one book, he kept a list of everyone who owed him money and how much they owed him. As they paid him, he would cross off their name off his list using a pencil. If they paid him an instalment or a partial amount, he would still cross off their name, but then add their name again, but as the last entry, along with the new amount that was owed.

In the other book, he kept a similar list, but this one was all of his outstanding bills – money he owed to others. He used the same mythology as with his receivables to keep track of his payables. If he paid off a bill, he would cross the name off his list.

If he paid part of the amount owing, he would cross the name off but add it at the bottom of his list along with the revised outstanding balance. Those two books represented his Account Receivable and his Accounts Payable. This farmer was a multi-millionaire.

The moral of this story is you don’t need an elaborate accounting system. Just make sure you focus your energy on your business – not the administration and accounting. Make sure you don’t turn your Mousetrap Business into an Accounting Business that happens to sell mousetraps on the side.

Let’s get real

A box full of receipts belongs in the eighties. It’s how things were done before office computers and accounting systems became prevalent, but we’ve come a long way since then.

We now have the tools and the know-how to keep you on top of things. It’s a lot better than always wondering what happened.

Is it all just a waste of time?

In the musical “EVITA.”, there is the wonderful lyric –

“Accountants only slow things down – Figures get in the way.”

At times it may seem like that all this ‘accounting stuff’ is just a complete waste of time – something just to keep the Government happy – just one more thing that gets in the way of doing business. However, part of running a business involves being compliant and therefore – like it or not – it has to be done.

A necessary Evil

Despite the hype, there are far too many accountants who lack any sort of vision when it comes to the people side of a small business. Many cannot see beyond the numbers because numbers are what accountants do – it’s what they understand.

Should you do your own Accounting?

Yes – No – Maybe!

What you DO NOT NEED is some elaborate accounting system that only you can understand. In other words – don’t go re-inventing the wheel with some weird and wonderful concocted methodology. When it comes to accounting, this particular ‘wheel’ has already been invented and it is called GAAP. GAAP stands for “Generally Accepted Accounting Principles”. GAAP is a universal system that any person with some basic accounting knowledge, can understand. As far as a small business is concerned, just keep it simple and straight forward.

AS AN ADDED NOTE – especially when it comes to a small business, an Accountant is not even necessary. All you need are the services and advice of a good Bookkeeper.

Accounting Systems

Fortunately, today we have some very elaborate computerised accounts systems. There are desktop versions, and there are online systems. We’ll discuss the pros and cons of these at a later date. But in the meantime – regardless of what method you use, you will need paperwork (invoices, bills, receipts, etc.) There is no getting away from this.

Keeping good records is simply a matter of habit

So here is what you need to do –

Make it a habit to put every piece of paper – be in bills, invoices debits, statements, whatever, into a file folder. Just put the day’s, or even the week’s documents on top of the previous period’s documents. That’s it! Simple!

DO NOT wait until the end of the month.
Do this as it happens.
That way it will become a habit.

Once the month is complete – simply start the next month with a new file folder. Depending upon volume, give these folders to your Bookkeeper along with all Banks and Credit Card Statements.

Make this a habit.
Really – it’s not that difficult.

– 30 –

Good luck with your Business
Michael

© Copyright 2020 – Michael A. Coates – All Rights Reserved

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