Armi Jakola-Ward | | Financial Management

Good to know about accounting: Good or bad accounting?

In the first part of our blog series, Jere talked about the accounting obligation, which means that it is the responsibility of every entrepreneur to organize their accounting in some way. Why does accounting usually mean only a necessary evil to the entrepreneur, which is sought to be organized as cheaply as possible? Why not see accounting as an opportunity? What does the unfortunate reputation of accounting even stem from?

In this article, we will explain why accounting is a good thing for your business and why it is worth seeing it as an opportunity rather than a necessary evil.

Accounting, duty or opportunity?

Accounting is often perceived as a somewhat inconvenient thing. With the help of accounting, the entrepreneur explains all the expenses of the company and as a result receives either residual tax or refunds. Accounting can be perceived as a tedious burden, as storing, and delivering receipts to the accountant takes precious time.

The unpleasant reputation of accounting is likely to be largely affected also by its obligation. Every entrepreneur has an accounting obligation and the accounting must be kept in order. In principle, we do not like it if something is mandatory. However, the obligation becomes much more tolerable when you consider the positive aspects of accounting and turn it from an obligation into an opportunity.

The benefits of accounting for the entrepreneur

Accounting prepared in accordance with good accounting practice and the Accounting Act gives a company much more than it takes. When the accounts are up to date, it is possible to verify where the money received has come from and where the money has been used. If necessary, the company can also use accounting to prove that the company is not used for money laundering, for example.

If a company needs additional funding, banks and financiers want to see up-to-date accounting. From the accounts, they see what the real financial situation of the company is, how the company has managed to develop it and what the future of the company looks like.

In a customer acquisition tender, the value of the company is increased by well-prepared accounting. Especially when a potential new customer is looking for a long-term partner.

When the records are always up-to-date, reports can be generated without the need for additional time to correct them. This usually gives a good impression to all parties when reports don’t have to wait.

With up-to-date accounting, the entrepreneur stays on the map of receivables and expenses, enabling them to react much faster to changing situations.

Why should a small business do double-entry bookkeeping?

The accounting obligation applies to every entrepreneur, but double-entry bookkeeping does not have to be carried out by a private professional or trader. This means that simply recording income and expenses according to when transactions take place in a bank account is sufficient to fulfill the accounting obligation.

Why is double-entry bookkeeping still profitable for a small business even when there is no obligation to do so? When doing single-entry bookkeeping, you are never completely up to date on where the money is going and where it is coming from. It is then also difficult for the entrepreneur to know whether the company is profitable or whether a loss is being made.

Planning with single-entry bookkeeping is tricky when the money available is not known exactly even a month from now. This is because customers may pay bills many months late and in single-entry bookkeeping, this receivable will not appear anywhere until it is logged into a bank account.

With double-entry bookkeeping, making decisions is much easier when you can see directly from the accounts what sales have taken place, what receivables are still receivable and what invoices are still unpaid. Double-entry bookkeeping also facilitates reporting, for example when applying for a loan and filing a tax return.

What do you pay an accountant for?

So, what is the role of an accountant in all this? As an entrepreneur, what do you pay your accountant for?

In its simplicity, the role of the accountant is to act as an interpreter between the entrepreneur and the requirements of the Tax Administration and the Accounting Act. An entrepreneur does not need to understand accounting terms and cumbersome vocabulary or be aware of all due dates when the accountant takes care of them.

The role of the accountant is to instruct the entrepreneur to act correctly, in which case all possible deductions can be considered. This keeps the accounts reliable and up to date. The accountant makes it easier for the entrepreneur to make a decision.

It is important to remember that the work done for the accountant is paid for by the entrepreneur, not by the Tax Administration or any other. The accountant therefore works for and for the benefit of the entrepreneur by ensuring that the accounting law and good accounting practice are complied with.

Is the accountant bullying?

Does an email from an accountant cause headache? It is not the job of an accountant to bully an entrepreneur with awkward questions and instructions, all questions are always based on some need. It is therefore important for an entrepreneur to be on the same wavelength with an accountant and to communicate openly if the words and terms used by the accountant are Hebrew. When there is a strong relationship of trust between the accountant and the entrepreneur, the entrepreneur can focus on where he or she is at his or her best, i.e., entrepreneurship itself.

The accounting specialist shall ensure that the mandatory obligations and reporting are properly and up to date. However, producing up-to-date and reliable accounting requires cooperation with the entrepreneur. It is good to remember that an accountant is not employed by a company, and therefore all the information needed to produce an accounting should be obtained from an entrepreneur.

If an entrepreneur has any wishes or development suggestions for keeping an account, it is worth boldly raising them with the accountant. In this way, one can think together about the best way to manage the company’s accounting in the way that best serves the entrepreneur. Every business is an individual and the needs of every entrepreneur are unique. The role of the accountant also includes taking them into account and facilitating the entrepreneur’s daily life regarding accounting.

We can help with your business accounting

At Gallant, we provide all the accounting services an entrepreneur need. Our accounting experts ensure that your company’s financial management is based on correct and up-to-date information and includes all the necessary documents. With electronic financial management, we bring predictability to your business finances.

The next part of the Good to Know about Accounting series delves into the settlement account; why do entries end up there and what is the disadvantage of having entries there?

Armi Jakola-Ward | Accounting Specialist

A diligent and motivated accounting specialist from Australia.

If you are looking for a reliable accountant, leave a contact request. We will be happy to help!