Business leaders aren't necessarily the biggest fans of accounting. Okay, that was an understatement - a lot of business leaders would love it if they never had to worry about accounting again.
Unfortunately, many business leaders actually take this idea too far, and they end up spending far too little time on their companies' accounting needs.
A recent survey from AccountantsWorld shined some light on just how much time small-business owners are spending on accounting, and it turns out that it's often a pretty small figure. That might not seem like that big of a problem for business leaders who work with accountants, but that's really not the case. As BizReport pointed out, one of the biggest issues that arises here is a disconnect between the company leader and the accountant. The result? A less-than-ideal approach to business finances, and to the company's broader strategy.
That's the bad news. The good news? All you need to do to remedy the situation is make the effort to work more closely with your accountant.
"Most small-business owners spend 10 hours or less on accounting each month."
Short on accounting time
As BizReport noted, the AccountantsWorld survey found that most small-business owners actually spend 10 hours or less working on accounting-related matters each month. A little under one-quarter of the survey respondents said they spend 10 to 24 hours each month on accounting tasks.
Setting aside the question of exactly how much time and effort business leaders should put forth when it comes to accounting, the fact of the matter is that these decision-makers aren't spending a ton of time here, and that means that they may not be as well-versed on their companies' accounting as they ought to be. That means that when they work with their accountants, they won't necessarily be on the same page.
Speaking to the news source, Dr. Chandra Bhansali, co-founder and CEO of AccountantsWorld, pointed out that one of the ways that this issue manifests is that business leaders will only reach out to their accounts if a problem occurs or if there's an immediate issue that needs to be addressed, like tax filing.
The better approach, she explained, is for business leaders to work directly with their accountants regularly and more frequently, instead of waiting for an immediate reason to reach out.
"Entrepreneurs who work closely with accountants using cloud-based software are often alerted of any potential problems ahead of time," said Bhansali, the source reported. "Make sure your accountant is proactively monitoring your important business drivers and key performance indicators rather than just crunching numbers."
This goes back to one of this blog's biggest recurring themes: The idea is that accounting should be a major boon to a company's capabilities and strategy. With an effective approach, accounting can help firms discover insights about their organizations and industries that would have been unknowable otherwise. But an accountant can only contribute to that goal if the business leader actually reaches out and works closely to understand the company's financials and how that may tie into broader strategic efforts.
That leads to Bhansali's second piece of advice: They need to ask questions.
"While an entrepreneur may understand the ins and outs of his industry, he may not understand the numbers fueling the business, such as tax deductions, deferred compensation, cash flow, budgeting and projections," Bhansali said, according to Biz Report. "Business owners should ask questions and work with their accountants to better understand the financial health of the company."
Essentially, accounting should be a two-way street: The accountant helps the business leader understand the company's accounting, and accounting best practices in general, while the business leader helps the accountant understand the organization and what it hopes to achieve.
Obviously, this doesn't describe every business, since many firms keep their accounting in-house. If that's the case, though, and accounting isn't handled directly by the business leader(s), then the same general concept applies. Instead of making a point of reaching out the the company's third-party accountant, business leaders should instead make it a priority to engage with their own accountant or accounting department.
Ultimately, the goal should always be to make sure that every element of company, including any third-party service providers, are all working together in unison. Everyone needs to be on the same page and working to achieve the same goal.
So, what's that look like in practice? What are the next steps that a business leader should take to make sure he's working closely with his accountant?
First, you need to connect with your accountant, whoever that may be, to make sure both of you are up to speed.
Next, develop a plan for the future. This should include not just goals, but also regularly scheduled meetings and a means for sharing updates.
From there, it's just a question of sticking with this policy. Don't let the meetings fall by the wayside - make accounting a priority at all times.