Tim Mazzarol has written an article pointing out why any small business owner-manager should be using their accountant for more than doing their tax. It's worth reading.
If you own or run a small business, we highly recommend reading Tim Mazzarol's article about financial reporting and cash flow.
There's a bunch of statistics in there, but you don't have to bother with them to get the core message: you really ought to be using your accountant for more than just last year's taxes.
Tim's piece sums up one of the universal difficulties of running a small business: understanding the financials, doing sophisticated financial planning, can be time consuming. Most people don't have the time or don't know how.
When it comes to the crunch, we do the basics like our taxes and balance sheet. As Tim puts it, we rely on "bank statements and annual reports for running the business."
That's well and good, but what most small businesses generally don't do is get a cash flow statement, according to a report cited in Tim's piece.
He reports that more than three quarters of accountants surveyed "look backwards" at their clients previous year's performance, "rather than using them to help manage the business going forward".
As Tim points out towards the end of his article, this is where accounting software can come in.
Where accounting software comes in
Speaking to software companies like MYOB and Intuit, one of the things they hammer on about is that by using their software, you should in theory be spending less time at the end of each or week manually typing in a shoebox full of transactions.
Many modern day accounts software have features like bank feeds, designed to take transactions automatically from your bank account, so they're visible in your accounts.
Another big point of the new breed of "cloud" accounting software like MYOB AccountRight Live, Intuit's QuickBooks Online and Xero, as well as others, is that you should be able to input transactions wherever you have Internet access - someone can enter a sale on their laptop when they're away from the office, and it should show up in the system, without you having to re-enter everything back at work.
The sales pitch is you spend less time getting your accountant and bookeeper to fix and handle the basics, freeing them up to do some financial planning for your business.
These software companies know that financials can be intimidating to a small business person. "So few of small businesses get into small business to manage their books," an Intuit representative commented to us recently.
"If you tell them upfront they need to understand chartered accounts, have all their tax setup - all these things scare a small business. They key is to say don't worry about that, you focus on running your business," says Dan Wernikoff, Senior VP and GM, Financial Management Solutions at Intuit.
That's all well in theory, but the problem, according to Wernikoff, is resistance to change. As he argues, "right now, oftentimes people don't know their old way is bad."
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