Every business owner knows that he or she needs an accounts system, but to many it is a necessary evil, rather than the driver for growth and profitability that it could be.
This shouldn’t be a surprise – entrepreneurs don’t get started because of their interest in accounting – they would probably not have made it if they had! The instincts of an entrepreneur are significantly different, and rightly so.
So what should your accounts system do?
The bits that you would expect to see are:
1. Perform accounting tasks – including issuing sales invoices (possibly – although in many businesses that is a very skilled task performed by commercial staff) pay suppliers, pay staff etc.
2. Maintain and report on the accounting records – you have to have an accurate record, if only for HMRC, and as the business owner you want at least some visibility about what has been happening, so some sort of reporting is essential.
3. Control cash – no business will survive for long without this, and the accounts system will usually be central to that process.
4. Ensure compliance with corporate / statutory and tax responsibilities – this is the bit that gets organised first, and will almost certainly lie with your internal accounts system or your external accountants – rightly so, as it is
a. distinctly boring to the average entrepreneur,
b. needs some technical knowledge which you don’t have time to acquire (even though you no doubt could, given a bit of effort) and
c. could have dire consequences for the business if it is wrong.
So what additional input should you expect from your bean counters?
A good finance function – no matter the size of the business – does the basics as described above, but in addition provides:
1. reports that describe the business in ways that the owner can understand, eg
a. sales & margin by product/location
b. cash consumption by activity
2. systems to generate the information easily,
3. cash to survive and expand,
4. a roadmap for where the business is going, and
5. a sounding board for the owner.
With these tools you would be in a position to run your business much more efficiently, to avoid problems which might otherwise overwhelm you, and to identify the most profitable and cash generative of ideas.