“Why is it taking so long to get the books done?!?!”
Why Accounting Isn't As Easy As It May Seem...
Many accountants are often asked why it takes so long. This is because many people are under the impression that accounting isn't that complicated. These people assume accounting is just adding and subtracting with a little division from time to time. That may be true in some circumstances; but, that's like saying auto repair is just turning a wrench. Like most occupations, there is far more to it.
When a business is small, accounting is generally fairly simple. As the business grows and sales increase, everything becomes more complex. Hiring people and doing payroll means understanding when a person can be a contractor or must be an employee, what taxes must be paid, what insurance coverage is required, and what withholding is necessary. Selling products will require collecting sales tax and setting prices to be profitable. Manufacturing products will require determing costs of good sold and how to classify inventory at different stages of production. When you buy assets like real estate or equipment, depreciation and amortization need to be calculated and adjusted over time. And if you have multiple owners, raise money, have investors, or take on bank loans or other debt, there is a great deal of complexity involved in determining who owns and who is owed what throughout the year.
Another consideration with accounting is knowing the legal requirements and regulations. This can get overwhelming very quickly as some things that seem simple are more complicated than they seem, especially when federal and state governments have different rules at different times. These rules also tend to change periodically, which means needing to stay current with the new regulations. All of these factor into taxes as well as making sure the company is in compliance so it can avoid fines, but there is far more value to accounting that that.
If an accountant is doing their job right, they're doing more than just paying taxes. The deeper understanding there is of what the company does and how the company operates, the more value the numbers have in not only understanding the impact of past decisions, but also in determining the opportunities and best options available for the business to make going forward. Does it make sense to change business structure? Will decisions increase or decrease the value of the company? Does it make sense to start a new copmany?
All of this, however, depends on the owners of the business understanding that accounting is a valuable tool to help them understand their business. It requires communicating with the accountants, answering their questions, and providing not only the numbers but the reasons for those numbers. When accountants have that, they can help the managers and owners understand what's really happening with their business and to make more informed and better decisions faster.
Accounting is more complex than you think, which means your accountant is helping to make it look easy. But is your accountant helping you understand what the numbers mean? Are they helping you make better decisions? If not, give Brightleaf a call and let's talk about how we can help your business.
- John Thrush