Top 6 Myths About Accounting
Accounting Myths are my Biggest Bugbear
Let’s Bust them once and for all!
(You might even decide to like your accountant better)
Myth 1: Accounting only exists to help me Appease the Government.
Rubbish! – Accounting’s tax focus has only arisen over the last 15 years or so. Accounting has existed in much the same forms since the early 1400s when Venetian Merchants needed a system for working out what was being transported, where it was going, and how much profit they were making (as their ships traveled hither and yon with cargo).
Accounting Reports were developed for one reason and one reason only – to help business owners make really profitable decisions; somewhere along the line Governments hijacked this single purpose to maximise their tax collection.
Increasingly, Accountants are returning to their former more advisory role, providing strategic and operational advice to their clients, ensuring their business plans make financial sense and their operations are tracking to plan.
Myth 2: I don’t need accounting reports to know how my business is doing.
What that is telling me is you don’t need any extra information to make the best decisions, and your decisions are never clouded by your emotions or perceptions. i.e. Your powers of information retention, deduction and mental telepathy are super-human! – Now if that is the case give me a call and Ill give you a job! There is a reason every big business has expensive programs, and teams of accountants to undertake very detailed reporting- not because they want to have someone to poke fun at – because reports add value, and rigor, to their decisions – enabling them to make more profit and beat their competitors.
When accounting reports are well developed and maintained, these monthly financials:
- show you exactly what has happened in your business
- predict what can happen next as prices and quantities vary
- forecast how your business will trend over the next few months
- indicate where to improve an area
all helping you make profitable financial decisions.
Reports will tell you if your prices are where they need to be in comparison to expenses you are incurring. Reports will show profitable areas and problem areas like theft, loss, waste, etc. If your report shows a major area of waste in your process, you then need to come up with a solution to the problem and either or improve the process to lessen the amount of waste, find a way to reap income from the waste, or find a way to reuse the material…. Are you still sure you don’t need accounting reports?
Myth 3: Accounting all about maths – and that is too scary for me.
This couldn’t be further from the truth – accounting is all about putting the pieces of a business puzzle together: analysing what the numbers mean from a business; be it problems with cash flow, increasing or cutting expenses and where money should be directed for the best returns. Once you get these reports, you then need to understand how to use them – without this skill you are still flying blind…Your Business is your baby, and even with the best accountant in the world working along side you – YOU have ultimate responsibility. Why would you leave it to chance, or simply abscond and let other people make decisions about YOUR profits?
Working with your accountant (or bookkeeper), to learn how to read your financial reports (even if you hate maths), is the single most powerful thing you can do to improve your profits and grow your business.
Myth 4: All accountants are the same.
Auditors ≠ Tax Accountants ≠ Bookkeepers ≠ Management Accountants
In fact, anyone can call themselves an ‘accountant’. And to make it more confusing, management accountants are not the same as auditors, auditors are not the same as tax accountants. While we all have an understanding of accounting principles, each has their own stream of specilisation to make sure everyone gets the right outcomes.
To protect yourself it is best to only hire accountants who are members of the recognised accounting bodies (eg CPA ICA ICAEW, AAT, ACCA, ACA to name a few).
Ensure all your Accountants are professionally regulated, and where necessary carry indemnity insurances, and maintain their currency in training.
For more info you can use this Quiz to check if your Accountant is any good.
Myth 5: Technology will soon replace the accounting profession.
Technology is certainly adding another layer of complexity to the life of accountants, especially as it has enabled far more accurate, and regular, tax collection of more complex taxes; consumption taxes such as GST, VAT etc were very hard to track and administer prior to the massive data management capabilities of the current systems. With greater data collection, [/twocol_one_last]
has also come streamlining and in many countries the automatic completion of personal tax returns, via a massive network of inter-connected banking, share trading, tax office, employer data is not far away.
It will be a long time before technology totally eliminates the need for good, profit improving, advice and experience.
Myth 6: Accountants like it when you make fun of them..
We hate it!
But for some reason everyone seems to thinks accountants are the masochists of the professional world. So next time you have something mean to say go pick on the engineers, HR, the ops team, anybody but the accountants! (Oh yeah that’s right… It doesn’t seem quite right to pick on HR but it is OK to pick on accountants???)
Time for a re-think please.
So I trust you can now see accounting as your friend and not your foe – use it wisely for profit boosting benefits.
Now that you have got a taste of what we can do… here are some more options to improve your business profits: