Accountants, or bookkeepers, do not provide financial management support and input for SMB owners to plan and control their businesses.
Every day small business owners are challenged by questions like; Where’s the money going? What am I doing wrong? What should I be doing? What’s missing?
They know that there are pieces missing in their business ... they just don’t know which ones.
There is one gaping gulf ... but one that’s not so obvious. Most SMB owners think that by having a bookkeeper or external accountant they have covered all the financial management bases.
Unfortunately they are wrong ... very wrong ... they haven’t!
With this misconception leading to the ultimate disastrous consequence ... a failed business.
There are many financial management issues that have a critical influence on whether the business survives or dies ... but these are not related to “bookkeeping accounting”. So these are not addressed by the “accountant”.
“It’s vital that accountants are helping their small business clients succeed – and it’s a concern that so many business owners wouldn’t recommend their advisor to someone else,” said Damon Anderson, director of partner and product at Xero.
In a recent survey many small business owners go as far wanting to change their accountant, saying that they:
- rarely provide support (62pc),
- have limited industry knowledge (57pc),
- make them feel like a low priority (55pc),
- are behind on technology (53pc),
- are unresponsive (52pc) and
- do not provide enough value (44pc).
Nila Khan, business advice manager at industry body ICAEW, says: “Accountants being unresponsive is the major gripe of clients. All they want is a response, it can be as simple as that. It can be a shame to lose a client over something so simple as lack of communication. It’s frustrating because it can be so easily fixed.”
Who’s to blame?
Quite clearly there’s a difference between the what the SMB owner thinks the accountant should do and what SMB accountants think is their role.
What business owners want their SMB accountants to know…
Looking at this in a lighter vein the following are some of the issues faced by the business owner.
- We’re too busy trying to survive to learn bookkeeping. Or practise it. Let alone keep track of all the changes to the Companies Act, a new act for this and a new regulation for that and a slew of acronyms we can't remember. Why can’t you give us a cheatsheet?
- Tell us what we should be doing.
- Tell us exactly what you want so we can help you to help us ... and hopefully we can save some money.
- We don't know the difference between balance sheets, income statements, or assets or expenses.
- We see you as our interface to the government.
- You're our business advisor. You’re the only person who sees what we’re doing. Tell us what we should be doing before not doing it bites us? And get creative, won't you?
- Yes, we mix our personal & business accounts.
- Sometimes it's urgent. Like pending divorce or starvation. And we pay from the only account that holds some cash. Often that’s the business account.
- We can’t tell you everything because we’re often embarrassed about what we did. And we forget what we did, when, and why.
Some of these issues can be solved by the SMB owner having a better understanding of the relationship. Having realistic expectations of the role of their bookkeeper or accountant. Knowing what SMB accountants do and don’t do.
As your business grows, you may find that your accountant is no longer a good fit for your business. There are many accountants that are perfect for a startup or small traditional business but do not have the skills or knowledge needed to support a scale-up.
The solution is not to just switch accountants ... the danger is that you will get more of the same! The solution is to fill in the gaps – what are the important financial management tasks that your bookkeeper or accountant doesn’t do?
Once this is clear then make a plan to fill the gaps.
Getting the right accountant plus the right financial management fundamentals is critical.
If one is missing, you could easily become one of the 90% of small players who close down within 10 years. Or, even more disturbing, to become one of the 99%, who after a lifetime in small-business, do not have enough to retire.
These numbers should give us reason to relook at how we’re doing and what we trying to do. And to start treating our small-business as if we controlled IBM. (If we do that we may.)
The solution: understand the role of the accountant and understand what else you need to do. And get a part-time CFO with SMB experience who will provide you with the missing expertise and support at a price you can afford.