Accounting for businesses can be comprehended in the same amount of time it takes to create a toasted sandwich.

In the time it takes you to slice a tomato and figure out how to rewrap the deli ham, we will have covered the advantages of business accounting, provided an overview of what accountants perform, and informed you of the circumstances under which you should seek the services of an accountant.

When it comes to the process of choosing an accountant, we will also provide you with some guidance regarding the types of questions you should ask possible candidates.

The total amount of time spent reading was approximately four minutes.

Keeping tabs on all of the financial transactions that take place within an organisation is the primary focus of accounting for businesses. These can be broken down into three primary responsibilities: locating, recording, and disseminating relevant financial information.

Benefits of accounting

If you do not come from a financial background yourself, you should make hiring an accountant for your firm one of the first things you do when starting it up.

Accountants won't simply look for ways to save costs for your company, but they'll also devise strategies to simplify your compliance with tax and administrative requirements, which will, in the long run, free up more of your time.

In the event that your business is subjected to an audit at some point in the future, you will be thankful that you made an early investment in a qualified accountant.

When should I hire an accountant?

Although their involvement in your company will get more involved once you start generating income and developing, it is still a good idea to bring on an accountant as soon as possible, even though their involvement will become more engaged as the business grows.

When you first launch your company, your accountant will be able to provide guidance regarding the organisational structure that will serve your company in the most optimal manner, as well as assistance in establishing the day-to-day accounting processes that will be necessary.

Even while you should think about hiring an accountant as soon as feasible, there is no requirement that this individual work for you in a full-time capacity. Because many accountants bill their clients on an hourly basis, it's possible that you won't need more than a few meetings with them in order to get your firm off the ground.

Once your company has reached a certain level of success, you should think about hiring someone on a more permanent basis.

What do accountants do?

Accountants can provide a wide range of services, many of which could be advantageous to your company. They are as follows:

• Providing assistance in the process of starting your business
• Advice and planning pertaining to taxes
• Auditing and reporting on financial matters
• Management of a company and economic analysis
• Superannuation advice

Accountants can not only assist you in locating methods by which you can save money, but they can also assist you in growing your business's revenue. You can learn more about the process that they use to accomplish that here.

You may also find here a list of questions that we think all owners of businesses ought to ask their accountants, which we have compiled and which you can read about.

What to look for in an accountant

What you require from an account will be determined by the requirements of your company as well as how well you are able to collaborate with the other people involved.

When looking for an accountant, here are some important considerations to keep in mind:

1. Area of expertise

Because most accountants will only specialise in one or two areas of finance, such as investment management or financial analysis, it is possible that many of them may not be able to complete all of the jobs that your company requires.

Consider what kinds of accounting work need to be done and whether or not your accountant has the expertise to undertake that kind of work.

2. Fees

Because many accountants and accounting companies charge by the hour, the cost tends to increase proportionally with the level of experience of the accountant as well as the level of difficulty of the work being performed. For instance, auditing is a more challenging process than bookkeeping; hence the cost of auditing will be higher.

Think about how much you can afford to pay your accountant, and ask yourself if the job is important enough to warrant the expense.

3. Personality

If you get along with someone, it will be a lot simpler for you to collaborate with them.

Your accountant is not an exception; given the possibility that you will be spending a significant amount of time with them, it is imperative that you get along with them and are able to collaborate well.

4. References

It is in your best interest to talk to the clients of the potential accountant you want to hire in order to get an idea of the nature of their work and what it is like to collaborate with them.

Inquire with them about the level of satisfaction they have with the services, fees, and availability of the accountant.

Top 3 takeaways

1. Recording, analysing, and disseminating financial information about a company are the three primary responsibilities of an accountant.
2. Having reliable accounting systems can help you save time, money, and anxiety in the long run (when dealing with the government and auditors).
3. As soon as you launch your company, you should think about getting an accountant.

How to become an accounting hero

In order to become a superhero in accounting, you need to be sure that you have a firm grasp of the fundamentals. Even Superman had to learn how to walk before he could learn how to fly.

People in this day and age have come to anticipate receiving high-quality work, and if they don't get it from you, they will go on to the next person who can fulfil their expectations.

The following are some of the fundamentals that clients anticipate from their accountants:

• Accounts that have been prepared in the most timely and accurate manner possible
• All work is delivered on time or ahead of schedule.
• No mistakes. It is possible that an inaccuracy in the actual costs itself could devalue the job that you have done almost as much as it is possible for a wrong name or address to be listed on your cover letter or accounts.
• The work, at the price that was agreed upon, together with any necessary and useful suggestions that you are qualified to supply
• No unpleasant shocks, such as if they were to get a tax charge for $4,000 rather than a tax refund.

 

Nevertheless, you'll need to start going above and beyond if you want to become a superhero in the field of accounting.

Take into consideration the following things as you embark on your journey to becoming a trusted counsellor or an accounting superhero:

Use technology to simplify your workflow.

Start off on the right foot by familiarizing yourself with the comprehensive lineup of accounting products available to ease not just your life but also the life of your customer.

Your heroism will be built on the foundation of streamlining accounting procedures, whether they are manual, complex, or both, for both you and your clients.

Speak their language, not yours

Instead of merely talking to your customers, try listening to what they have to say. Find out more about their company and the industry.

Assess the level of their financial understanding while you listen, and use terminology that is appropriate for that level; nevertheless, do not patronise them or assume they have a lower level of understanding than you have.

Do they understand the difference between profitable cash flow and just regular old cash flow? If not, are you able to explain it to them in a way that they will comprehend completely and won't be able to forget?

Because you are the only accountant they can comprehend and relate to, there is a chance that they will look up to you as a hero.

Solve cash flow issues

Businesses that are successful sometimes teeter on the edge of failure because they do not have sufficient financial resources or reserves to withstand adverse conditions.

• Don't just keep the books; instead, interact with customers to ensure they fully grasp the concept of cash flow.
• Investigate any problems with cash flow and contribute to finding solutions to them.
• Put in place the necessary tools and systems for cash flow management.

If your client does not have to worry about when the next dollar will come in, they will be able to concentrate on developing their company, coming up with new ideas, and expanding.

Find efficiencies

Utilize the knowledge you've gathered from working in various industries and firms in your conversations with customers to unearth previously undiscovered efficiency.

• Make use of statistics pertaining to the industry or sector to locate potential areas of expansion.
• It's possible for stock holdings to eat up a lot of cash. An excessive amount of stock is both a financial burden and a storage expense for the company. Insufficient stock results in an increase in the number of orders, which in turn drives up the cost of delivery and raises the risk of upsetting consumers by delaying their orders.
• Do they require an overdraft facility or additional funds for a longer period of time?
• Take a look at the debtors and the system of invoicing. Electronic invoicing from MYOB can increase both the effectiveness of revenue collection and the speed with which payments are made.

Discover where is the profit made — and where losses are incurred

Ask your customers where they make their money and where they lose it to gain insight into their financial situation. You should assist them in finding the answers.

• When was the last time they analysed all of the products in their catalogue?
• Conduct a review of the product's profitability.
• It is recommended that one of the goods be discontinued, and increased focus should be placed on those that bring in the most revenue.
• Discuss potential uses for times that are now unproductive. For several types of companies, January is a crucial month in determining the year's success. Every other month brings in money, but a poor performance in January might throw off the entire year's numbers.

Meet with clients more often.

Request more frequent meetings with your clients so that you can discuss the progress of the business.

Include some metrics that aren't related to money in your reporting. Establish the meeting's purpose, and refer to it as a quarterly business review.

Discuss, investigate, and plot out their activities for the following three months or beyond.

Step outside your comfort zone

The transition from being an accountant to having hero status can initially be an unsettling experience. However, the majority of accountants I've worked with have shown a desire to generate additional value.

They want to be more involved in the process of making a company successful rather than simply reporting on its achievements after the fact.

Accountants are in the best position possible, but they are frequently unprepared. It may need some personal growth on your part, but the end result will be well worth the trouble.

Planning and preparation are absolutely necessary to achieve success in accounting, just as they are in any other field. Find your niche.

It's possible that you'll be the hero who teaches customers to see the big picture when it comes to their finances for the first time.

You may be a hero of analysis, able to spot irregularities in data such as numbers and ratios in order to uncover previously unknown problems. It's possible that you'll be the driving force behind the expansion.

It doesn't matter what kind of accounting hero you are; just do your best.

You have nothing to lose by trying new things, and your customers will notice the difference in you if you do.

Six secrets to thinking like an accountant – and 

In the interest of full disclosure, let me begin by stating that I am a financial accountant. I hold the designation of Chartered Accountant. I know. People have the impression that we are a dull bunch because we always walk about with briefcases and bowler hats. There is a lot that can be blamed on John Cleese!

I am no longer involved in any day-to-day accounting work; rather, for the past 16 years, I have collaborated with accountants working in public practice to assist them in developing their practises and providing business advice services that are beneficial to the clients of those accountants. I always tell accountants that when people they don't know ask them, "What do you do?", they should avoid responding with "I'm an accountant" because of the reasons stated above.

In point of fact, though, I take great pride in the work that I do, and there are a number of very good reasons why business owners should try to think like accountants from time to time – perhaps not constantly, but certainly on occasion. The following are the first six of those reasons:

1. Ask questions like an auditor

I am one of the many accountants who have also received training as an auditor. My wife may occasionally admonish me for auditing her when I ask her too many in-depth questions about the thought process behind anything she has done. (It serves as a useful reminder that you shouldn't carry your job home with you.)

Now, I am sure that the term "auditor" sounds even worse than "accountant," but all auditors are taught to ask lots and lots of questions, to never take anything at face value, and to get to the bottom of the problem that is now being addressed. Why should we care about this? If something doesn't smell quite right, there is probably a good explanation for why that is the case. The ability to think analytically and investigate more thoroughly can be an asset in avoiding walking down dead ends.

In order to avoid making expensive mistakes in your company, it is important to run the figures and think about the worst-case situations. (As a side note, I should mention that I am part of a tenor line with a local singer's group that also includes an actuary, an airline pilot, and an engineer in addition to myself. I am certain that you will not find a tenor line anywhere on the earth that is more analytical than this one!)

 2. Weigh up the risk in every potential new project or strategy

When a more senior member of a company's staff comes up with a novel idea, the customary reaction around the boardroom table is for everyone to get enthused about the potential benefits of the proposal. People perceive opportunities to make money, exciting new enterprises, and one-of-a-kind opportunities. Everyone wants to get on board with this new trend. But who is assessing the level of danger?

Too frequently, the potential benefits of a new idea are prioritised over any risks or potential drawbacks that may be associated with implementing it. A mindset similar to that of an accountant would provide far more thought and analysis.

What is the absolute worst thing that could happen? In order to take advantage of this prospective new opportunity, what are we potentially giving up? What is the cost at which we will no longer lose money by doing this?

What will happen if we reallocate resources in this area to another location?

This kind of approach can help to foster a well-rounded argument while also preventing you from seizing a fresh chance too quickly and, as a result, perhaps squandering a lot of time, energy, and money on something that has more potential drawbacks than potential benefits.

A word of caution: make sure you don't go too far with this. It is necessary to conduct a risk assessment, but you do not want to restrict innovation in the process.

3. Practice double-entry bookkeeping

Luca Pacioli, a Franciscan monk and mathematician, is credited with the documentation of the double-entry accounting system in the year 1494. It is documented that he cautioned Venetian merchants against going to sleep until the amounts of their debits and credits were equal. What on earth does this mean, and how does this pertain to your company in any way, shape, or form? You have probably come across the idiom "revenue is vanity, profit is sanity, but cash is king." Well, there is no doubt that you are familiar with this statement. The pursuit of expansion for its own sake is fraught with peril, particularly if you are not familiar with the concept of double-entry.

The question of why there is a profit on paper but no cash in the bank is one that is posed by many owners of businesses to their accountants. Accountant sees it as plain as the nose on their face, and they should make it a priority to instruct their clients on the fundamentals of double-entry bookkeeping.

For instance, you can make a sale to me of anything that costs one hundred thousand dollars. It will show up on your profit and loss statement, but if I don't pay you for another six months and you've already had to pay your vendors and staff before that time, it's possible that you won't have enough money to celebrate the sale's profit before you run out of cash altogether.

4.    Understand your critical numbers

It is one thing to take note that sales are lower than the previous year or are coming in below the target. To comprehend the reason, however, is an entirely different challenge.

If you hire a qualified accountant, they will help you to sharpen your attention on the key factors that determine your company's income, cash flow, and profitability. If you notice a decline in your sales, you need to be able to identify the reason why.

Have you lost a significant number of customers? Or not acquire a sufficient number of new ones? Or, it's possible that the number of transactions that you anticipated simply wasn't achieved by your business.

Or, it's possible that the book was fine, but for some unknown reason, the average transaction value dropped. Lacking cash? What exactly is going on here? Is it taking your customers a longer period of time to pay you? Is there a lack of order in the way you manage your inventory? Or have the proprietors of the company taken out a larger sum of money than they ought to have done?

You are able to avoid unpleasant surprises and take corrective action in a timely manner if you concentrate your attention intently on your vital figures.

5.    Budget for everything — and forecast your cash flow

I've done a good job of educating my wife. Before she makes any significant purchases, she always checks with me to see if "do I have the money to do that?" I keep assuring her that she doesn't need to ask me, but in my heart, I am proud of the fact that she is thinking like an accountant.

My opinion is that the vast majority of small firms may gain something from having a life, working, cash flow, and budget and that accountants ought to suggest that service to the businesses they work with. (If your accountant is not one, you should try to put yourself in their shoes and ask them what might be required of you.)

It is absolutely necessary to have a solid understanding of the timing differences that exist between sales revenue and cash inflows, as well as between expenses and cash outflows. If you find that you need to purchase new equipment, how are you going to finance the purchase, and how will this affect your current financial position?

6.    Look at the return on investment on everything that you do

If they asked themselves whether they were obtaining the highest return on investment for a particular expenditure or expense, the majority of businesses could reduce their costs by five to ten per cent, and in some cases even more, by doing so. Consider every penny you spend on your company to be an investment. Why do you continue to keep them if they do not, in some way, contribute to the generating of money, the protection of growth, or their own growth?

One good illustration of this is marketing. The majority of advertisements for small firms are placed in two or three different venues. However, not many people are aware of the return on investment for each campaign. Because of this, rather than determining which of the three campaigns produced the best results, putting more effort into that one, and phasing out the one that generates the most losses financially, they simply renew the advertising contract every year. This line of reasoning can be applied to each and every one of your expenditures.

I have high hopes that you will accept at least a few of these suggestions and implement them in your company. Give it a shot; it won't kill you to think like an accountant once in a while!