Understanding Business Accounting

Accountants and business owners work together to be financially secure and continue business growth, or they should anyway!

When understanding how each role functions, the accountant or bookkeeper can relate more easily to the business manager, and vice versa.

This doesn’t mean that the accountant is on hand every day within the business, or that the manager is constantly checking in with the bookkeeper on what to do, but it does mean there is a flow of communication.

In this article, we explore why this relationship is such an important one and what it can mean to both parties.

Business Terminology

When does a Customer become an Accounts Receivable record, or a Supplier an Accounts Payable entry?

What exactly is account reconciliation, and what does Inventory have to with not inventing anything?

It’s no wonder business owners dislike the accounting side of their own business and sometimes have no idea what goes on.

It’s also justifiable for the business accountants to get frustrated when looking through the various business details, feeling confused because they don’t understand the market in which the business is involved.

A coffee roasting business will use different terminology than a plastic manufacturing plant and, somehow, the accountant must work out which term relates to which sector.

A general meeting before any work commences, and a little bit of research from either side on the opposite role, will enable quicker understanding and a better result for all parties involved.

Responsible Accountability

Who is responsible for what task, and how much information needs to be shared before it becomes too much for the other party to understand?

It can be a daunting task to navigate through facts and figures and ascertain the meaning of results when there are no clear distinctions between who is or isn’t responsible for certain tasks.

It’s good to work out what tasks are expected of each party and when these tasks are due to occur during the initial consultation phase.

It will waste time and could indeed be a costly mistake if, as a result of one party thinking the onus for a task is on someone else, the task never gets done.

The business will suffer, people will stress, and workplace relationships can breakdown all because of a simple misunderstanding that should have been sorted out earlier.

Work out what each party is good at and utilise those skills for the best results.

Working Time Frames

When making a cup of coffee takes only two minutes, but a financial year takes 12 – 15 months, the difference in expected time frames can be a nightmare.

Some business calendars move depending on customer expectation and service levels during busy periods, whereas others can change when sales are made, on monthly deadlines or in keeping with the financial year.

As each party can be working to different time frames, knowing what is expected of the other party can help to alleviate stress if someone is not contactable for some reason.

It’s important to understand that some dates are flexible, whereas others must be set in stone and adhered to, ensuring a smooth process from both parties.

Recording of Information

Accounting can be very much like programming. A lot of work must be done to balance the results.

Programming is all 0’s and 1’s and either works or doesn’t. Accounting and using the general ledger is similar: the numbers either add up or they don’t — and accountants want to know why.

Many business owners may not understand where they’re losing money until it has pointed out to them in black and white, in a report showing a process that needs to be changed.

Accountants need to know where to look to find discrepancies. Business owners can help by knowing how to record discrepancies so as not to waste time each month.

Wastage can be a huge business loss if not managed correctly. Many businesses fail to record where their waste product goes, essentially throwing money in the bin.

The best procedure is to record everything. Don’t let things slide. This is why discrepancies occur.

Work Flow Processes

It’s all well and good to have everything else sorted out but, if you are not aware of business work flow and don’t know how each area of the business works, trying to account for it all is going to be a nightmare.

A well-run business is like a well-oiled machine. It should be able to run somewhat autonomously, be easier to balance and better to manage.

Processes should be in place to ensure information is shared as required. There should be no kinks in the system holding anyone back.

As soon as an issue arises with either party, it should be bought to the attention of others so that changes are communicated, the process reworked and the day to day running of the business unaffected.

Although an accountant might not work for you directly, they are a big part of your business and therefore a huge part of your work flow management.

Conclusion

With understanding from all parties involved in the business, the business itself should run smoother financially and managerially.

It’s not imperative to know another person’s role inside out. What’s important is to understand what each role brings to the business and how these contribute to accomplish a common goal.

Communication is key and fosters a better work environment for all involved.

Accentis Enterprise will be able to help from both sides of the fence in part due to our general ledger module being a vital help to business management overall.

Accentis Enterprise is a perfect fit for any growing business, and we’re specialists in business accounting.

Are you heading to the Accounting Business Expo in Sydney at the end of March? We are!

Come and visit us on stand F35 to find out all about how we can help your business in accounting and financial reconciliation. But also how we are able to fully-integrate to our Payroll, Manufacturing, Time and Attendance, Fixed Assets and Maintenance and much more!

Has your business grown to the point you need some better business software?

Are you ready to make more money for your business?

Click here to start your journey today!