Good Accounting is Good Practice

Another good tip is to use your accountant’s experience to develop an approach that suits your needs. Again, it may sound obvious, but we find too often accounts clerks are left to decide upon, and implement, new accounting systems that the accountants only find out about when there is a problem. Even if there is not a problem, installing new systems without proper evaluation often leads to information being produced that no one looks at, and to a more complex process than is really needed.

External accountants work for clients in a variety of businesses and this experience can be used to help decide the best and most cost effective approach for other clients. There are a number of proprietary software programs available to help improve a business’ efficiency in producing accounts. An intimate knowledge of accounting is not required to operate these, but if businesses also use their accountants and accounting staff sensibly, such programs can give instant reports and an insight into the status of a number of business areas. They also help maintain filing with computer-based records. Even manual files will be maintained more efficiently if data is entered regularly.

Successful business owners recognise that up-to-date accounts help good decision-making, not just for internal management reasons, although this is important. Having accounts up-to-date means that you are ‘opportunity ready’ for any external approaches that may arise, such as new business ventures, acquisitions, agency opportunities or trade buy-outs. Being able to produce accounts promptly can be a major benefit, particularly if a new business partner wants to see audited accounts. Being able to do so quickly and easily shows you are on top the business and will get any new relationship off to a good start.

Our view is that accounting procedures and compliance should not be seen as a cost centre but as a valuable source of useful, if not essential, management and financial reports and a worthwhile discipline to have in place.

There are ways of saving costs and at the same time making best use of the accounting function. These include keeping processes simple so that accounts are easy to prepare, doing as much simple processing as possible in-house, and giving information to your accountants in easy to use ways so that preparing final accounts is made simpler.

This latter point really reinforces the argument about keeping the accounts up-to-date. If they are, you know that when the accountants get them they are already in a usable form rather than the proverbial bunch of vouchers in a shoebox. Maintaining accounts regularly will inevitably cost less than leaving it until the end of the year.

It will also mean they are more accurate, an important consideration when dealing with the Tax Office. Remember, the Tax Office records are likely to be very accurate and it has access to a number of external databases. If there are inconsistencies between what it knows and your returns, prepare for an audit.