By Dave McPhedran BCom. CA
Every year basic bookkeeping errors cost small business thousands of dollars in extra accountancy fees. This is particularly so at this time of the year when we are completing the annual financials, where the increased costs come from analysing and correcting errors made during the year.
The annoying thing is that quite often these errors are so basic that it leads to the question of whether or not the business owners really understand what is going on inside their business. For example, if profit and loss reports are generated by your accounting system there may be items incorrectly represented that will show a completely different picture to the real state of the business.
And it’s not just the extra accountancy fees either. If you get an IRD GST audit for example, no stone is left unturned and can result in significant penalties for incorrect GST claims.
One of the most common complaints we get in relation to increased accountancy fees is ‘but I moved from a written cashbook to an electronic version so it should have been easier for you.........’ Well this is not actually true in many cases. In my experience people using manual cashbooks often made less mistakes as all the entries were visible at a glance and errors could be easily detected and corrected. The biggest problem with moving to an electronic cashbook is usually the absolute faith that the ‘system’ overcomes human error.
The fact is that if you didn’t really understand basic principles in a manual cashbook then an electronic cashbook will be of little gain when it comes to your end of year accounts as it often takes longer to track down errors in an electronic cashbook than a written one.
Our friends at MYOB (producers of accounting software) have supplied a few tips entitled ‘How to get the best value from your Accountant’ Click here to read their tips.
However in recognising these problems some time ago, we designed a couple of products to help our clients get on top of their financials.
For those who wish to move from a written to an electronic cashbook we have our own cashbook called Your Cashbook which is a simple yet very effective method of handling any number of financial transactions. This is a fairly unique product as we wrote it ourselves with a business owner in mind at the other end, rather than an accountant.
Also we have a course entitled ‘Basic Business Finances’ that covers such topics as Getting The Most From Your Financial Reports, Accounting Basics, Understanding your Electronic Cashbook and Online Filing.
Whether you are doing your own accounts or employing someone to do them for you I cannot overemphasis the importance of SME owners to understand what is going on in their accounting system. Not only will it give you the information you need to make timely key decisions but it will also save you money.
For more information on the products mentioned here contact me anytime.
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