This is especially true for small- and medium-sized businesses, where folks tend to wear a lot of different hats. Here are two major ones to avoid…
1—Doing It Yourself
It’s hard to let go. If your name is on the company letterhead or even if you just got in on the ground floor, it’s hard to give up control. Especially when it comes to money.
Business owners want to be part of things – all things – when it comes to their companies. They want to know that every piece of the puzzle is shaped exactly as it should, so it’ll fit perfectly with the rest. And that’s a hard thing to do.
Some aspects of running a business are easier for a neophyte to grasp than accounting. It’s not the math – it’s the accounting principles behind the math.
When it comes to customer service, anyone in any business can put themselves in their customers’ shoes, as long as they have the imagination to do it. They can ask themselves what they would want, as a customer, in any given situation.
That’s not to say that everyone can be a customer-relations whiz – the fact is, some people don’t have imagination and others aren’t good with people and shouldn’t be anywhere near customers.
But customer relations is generally more approachable than accounting. Again, it’s not the math, it’s that there are complex accounting principles behind any company’s books. Without that knowledge, it’s hard for an average business owner or manager to understand the nuances.
Beyond that, however, there simply comes a time for most companies where they’re too big for one person to have their hands in everything. At a certain size, companies need to spread the workload around.
So, even if an owner is actually an accounting whiz, their time is better spent doing other things. Also, it’s always a good idea to have multiple sets of eyes looking at the numbers. In the case of a whiz accounting owner, that owner could act as a second set of eyes.
2—Trusting the Books to the Wrong Person
Small businesses, especially if they’re family businesses, tend to fall into the trap of having someone close by do the books, regardless of their accounting experience (or lack thereof).
It seems to make sense. Accounting tends to be one of the tasks that business owners don’t really want to do or don’t have the time to do, so they pass the job onto someone – anyone – who’s available and seems capable.
Also, there are plenty of accounting software tools out there that non-accounting people can use to record financial transactions.
But while it might save money in wages to have a family member keep the company books, it could also end up costing a whole lot more in penalties if that person makes a mistake – a not-uncommon occurrence.
An inexperienced bookkeeper/accountant may use the wrong type of accounting method, misinterpret the value of assets or incorrectly estimate expenses. And accounting software isn’t necessarily going to correct the mistakes – that takes knowledge of the accounting principles behind the accounting.
Inaccurate data entry or incorrect classification of expenses can lead to audits and penalties. While hiring an accounting expert (think “Trusted Advisor”) costs more in the short term, it can easily cost less in the long term.
– Brenda Sherrodd, Avitus Group Director of Accounting Services
Let Someone Else Wear the Accounting Hat
Whatever business you’re in, you’re probably not doing it for the accounting (unless, of course, you’re an accountant).
But while accounting may not be your focus, it’s a vitally important part of your business. It’s not something to take on yourself or simply hand over to whoever is on hand.