The Problem with Accounting

For small businesses - dealing with tax is a massive headache. Many owners / managers are completely incompetent. They would rather not do it, or handball it wholesale to a suburban accountant. Typically they owner would dump a folder full of illegible receipts in front of their book keeper:

“Here, deal with this”

… and then abscond, magically hoping their accountant takes care of everything.

When presented with their reports for confirmation: do they have the competence and ability to verify or audit their own statements?

Not a chance - even if they wanted to. And most don’t. Here are some key things you need to know:

Most Important: You need to know basic book-keeping

Once you do this, idiotic transactions cannot be hidden. Because you will be able to question them.

Items to Look Out for:

• Ensure internal transfers are not accounted as part of your sales-tax records. If you accidentally include internal transfers, then your sales tax payables will be astronomical - through the roof.

• Cash or Accrual Accountants are careless. Our previous one (allegedly) was not consistent. Submitting returns in one year on a cash basis, and in another on an accrual basis. Such errors can only be discovered if you carefully audit your own accounts.

• Suspense accounts: When things don’t balance, it requires a little bit of work to find out what went wrong. Some accountants are too lazy to put in the effort required - it is much easier to make the books balance by using a “suspense account” - which is just a place to dump unbalanced figures, under the rug, to make it work. Balancing is an annoyance. Watch out for accountants who do this.

• Accountants who do not answer you: email black holes. When you call them (and I don’t like calling anyone) their #1 objective is to get you to: (i) shut up, and (ii) get off the phone.

• Accountants with bad communication skills: It is helpful to deal with someone who speaks your native language. The minimises the potential of miscommunication.

• Dishonest accountants: If they actively suggest that you lie - for convenience - that is a big warning sign (in my book). Because if they are openly trying to be convenient with you, they will also lie for the sake of convenience behind your back. This is a no-go for me.

• Dishonest practices: My objective are not to obtain some benefit “if I can get away with it” but to do what is right and just, according to the hierarchy of authorities I answer to: God, Nation, State, Council, Church, Family. I will not openly declare which one holds primacy, but it should be obvious. One of our accountants insisted on revaluing our income, every quarter, down to zero, so that we would not have to make PAYG installments to the tax office every quarter. While I detest this type of taxation (which I regard as theft), we would effectively have to perjure ourselves by declaring zero income. I have no interest in doing so. I should have taken note here, because this same accountant then turned around and gave us bad advice.

• Gives bad advice: You hire an accountant so they can give you competent and correct advice. Sometimes there are gray areas: e.g. “I don’t know”. You pay big bucks, and that’s the answer you get? What exactly did I pay for then? In other cases: there are no gray areas. But pure incompetence. When my accountant gave me advice that was so patently incorrect, I resolved to fire them. Whom should I hire in their place? You are better off taking your chances hiring any fool who passes by: they cannot possibly be any worse, but may potentially be better.

• You Must Check Always check whether they know something. Ask them a simple question: basic book keeping. Or ask them something which should be elementary for them. e.g. “Do you use MYOB? Yes? Ok then what’s the difference between NT and FRE when creating an invoice?” They should have an answer. If they don’t, you need to find out why. Or ask them to post some basic journal entries. It is a 10 second conversation. The answer should fly out of their mouths. e.g. If I’m recording an increase in the account of an asset: should that be a debit or a credit? (It should be a debit).

• Accountants who flip: This is where your accountant hires a bunch of low paying book-keepers in India. Those guys do not know you, and don’t care about your books. If they make a mistake, that’s your problem. This is a nightmare. The worst part is that, if you do not check, they’ll get away with blue murder.

• Lazy Accountants: Where they are not willing to put in the hard work to fix something? e.g. A mistake in a deed? You should destroy that deed and re-print it. An accountant of ours was too lazy to do so. This calls into question the entire deed, and will come back to bite you in the future, as it did me.

Accounting, and HR are two functions that CANNOT be outsourced. It must be directed from the top with close supervision.