The Value of an Accountant to the Small Firm
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THERE are many small businesses started each year by persons who have had no previous commercial experience and the value of an accountant to such businesses cannot be overestimated. An accountant will not provide a report on how to run a business, but most certainly he can point to any weaknesses and analyse trading results to provide facts. It is then up to the owner of the business to consider these facts and form a policy of trading that will ensure every advantage is being taken to make the business sound and profitable.
This is a facility that accountants can provide which is usually overlooked by the smaller businessman, In large companies the impression can he gained that the accountants run the business, but actually they present the facts in a logical and concise form so that the directors can make a decision on policy for the future.
For the smart business an accountant with a moderate practice will have a general picture of many trades, and although he will never disclose one client's affairs to another he is in a favourable position to form judgments on trading results and his opinion can be of great value.
Function Not Understood There are probably three main reasons why many small businesses do not employ an accountant. First, the accountant's function is not properly understood; second, a fear that if the affairs of the business are discussed with an outsider the information may be passed on to other local traders; and finally, the cost of the accountant's fee is not justified.
I have indicated how an accountant can help the owner of a business, and whereas the large concerns have within their organization experts in many fields, their need for an outside accountant is negligible except as an auditor. However, the small business does not have the benefit of people within its structure with expertise and this is where the accountant can partly fill the gap.
Integrity and Confidence Most professions are only referred to as such because they have established over the years that they provide a service that is backed up by integrity and confidence and no professional man would expect to succeed if he did not preserve the utmost secrecy of his client's affairs. If more people realised this, there would be less hesitation about consulting accountants and other professional people.
If small businesses fail to employ an accountant because they cannot see the justification of their fee then they cannot know what the accountant can offer them, and it is not until they are in difficulty with the Inland Revenue that they make any approach to find out. It is when we come to the field of taxation that the accountant shines in the eyes of some of his clients. No one likes paying taxes and an accountant will not help you to avoid your liability. But he will ensure that you pay only the correct amount, provided you have given him the chance to help you.
The Commonest Problem This is the point where accountants frequently get criticized for failure to produce the result expected by their clients. Probably the commonest problem that accountants face is the failure of their clients to consult them when trading starts. If only businessmen would employ, or at least consult, an accountant when they start trading, the fees would be less and the clients would receive better service.
First, the accountant would suggest suitable books and records that should be kept, so that at the end of the year accounts could be produced with the minimum of trouble. This would also mean that the accounts would be ready quicker; trading results are not much use if they are six months old.
Depending on the type of business, arrangements can be made so that regular statements can be produced quickly showing the affairs of the business. In fact, in some trades it is desirable to have weekly results, and if the books are kept with these sort of points in mind it is surprising how easily the essential figures can be extracted.
It must not be lost sight of that when an accountant is not employed until the Inland Revenue has made a demand for tax he is at a big disadvantage to ensure that his client receives all the possible allowances permitted under the regulations.
Importance of Records There are several reasons for this. The books will have to be examined in very great detail, and even then the accountant could miss items of expenditure that legitimately could be charged against tax. The owner most likely will have forgotten many details of transactions. More important, invoices and supporting evidence may have been mislaid. It is essential that the accountant can show, if required, documents and records to support any claim he is making on behalf of a client. If only records are kept the time spent will cost far less than the amount of tax saved.
The taxation system is very complicated and instances frequently arise where the same result so far as the business is concerned can be arrived at without attracting tax if the advice of the accountant is taken first. But he cannot correct errors which are the result of a client's lack of knowledge of taxation regulations. The 1965 Finance Act will create many problems for all sizes and classes of businesses which will not be felt by many people until their tax returns for the year ending April, 1966, are made. Now is the time to look for an accountant if you have not employed one before.
Protection Against Dishonesty
There is a further field that applies particularly to the road transport industry where the accountant can save his client time, money and worry: this is in setting up systems to protect the owner against dishonesty. In some industries this is not always a major problem, but when most of one's staff are operating away from a base it can quickly become a major problem and can also react seriously against the goodwill of the business apart from the immediate loss of profit.
There are many standard types of forms that can be used to assist in keeping Control of staff activities, but although they are produced by people with a great deal of experience they do not always meet the individual needs of every business. So the adoption of established methods of control is most important, as it is a waste of time and money to have a system that does not quickly show when trouble is occurring.
It must not be assumed that control systems will stop dishonesty, but if the system is good it will give early-Warning signals that something is going wrong.
There would be less dishonesty if more firms kept a satisfactory control over their staff, as it is a reflection against a business if its employees can be dishonest over long periods without being discovered; and, as already mentioned, this can seriously affect goodwill that takes time to build up but can be destroyed overnight.