Many entrepreneurs who feel confident about their accounting know-how take it upon themselves to do their own accounting function. The thinking behind this is actually sound: “keep your fingertips on the numbers the business is producing”.
Producing the goods
Unfortunately, many business owners (despite having the skills to do so) don’t fully understand the rigours of monthly accounting and the processes needed to run an efficient system. The inevitable result is business owners that are unable to provide accurate records that are reconciled to their bank account. They are unable to juggle all the balls at once and they drop the one they are not 100% sure of doing.
This situation results in:
- Your external accountant (who charges you for his time) has to spend more time than necessary processing your work
- He lodges returns with SARS that are not accurate, through no fault of his own as he is only submitting the figures you give him. This leaves you exposed to potential penalties.
- You cannot afford to spend time with your accountant to get your internal monthly accounting system working, because your accounting budget has now been exhausted.
To ensure that accounting knowledge of both you and your accountant is used to efficiently and effectively run your small business, you can either:
- Develop your own financial knowledge or technical know-how of accounting through study and practice, do it yourself and do it properly, or
- Let someone do it for you and let that person guide you through the financial performance indicators you should focus on
Option 1 is difficult if you’ve never studied accounting and are under the time constraints that most business owners face. Studying part time is never easy and your efforts are often put to better use elsewhere in the business
Option 2 can also be problematic, as you may not be able to afford to hire a qualified Accountant. Bookkeepers typically do not have the business knowledge to help you analyse what the numbers mean.
The solution: Do what you can with what you have because what you have is enough! This is an indicator a successful entrepreneur, and the best option
- Make sure your books are in order, up to date and reconciled to your bank account
- Gain accounting know-how to understand what your accounts are telling you. This doesn’t mean you have to study accounting, but seek guidance from those who have – in the least expensive way of course! Ask your accountant to take you through the basics with you. Given that he wants to take care of you AND your business – he will happy do this, normally at no extra charge. Do it yourself first and ask him to guide you in your findings.
Outsourcing your monthly accounting requirements to experts, at an affordable rate might be the best option for a business owner with an early-stage business: your monthly accounts are in order, and experts are on hand for financial accounting guidance when you require it. Read about outsourcing this function
We care about you and your business and specialise in helping you in your business. Talk to us today about gaining that extra knowledge that will give you the edge.
Look into our additional service called The Accounting Coach, we help small business owners run their business better by harnessing their accounting information!
This article was updated in March 2023.