While many consider accounting an art, accounting is also a science because of the focus on recording and presenting data (financial) through the scientific process, which involves observation, collection of data and investigation. Many find accounting difficult because of logic and reasoning applications involved with the subject. Additionally, many need to understand fundamental concepts before mastering financial accounting. Beyond the classroom, though, accounting is problematic for businesses as well.
Ironically, some of the major accounting issues businesses have relate to business operations. Common problems include:
- One problem businesses encounter is assuming that cash flow equals profits. Proprietors think if they have closed a deal that they have the funds not really considering the time it might take to deliver the product.
- Bookkeeping is also another area where businesses have challenges. To maintain accurate and up-to-date books, bookkeepers have to record every large and small transaction. Recording and categorizing the flow of money into and out of a business as the transactions occur prevents serious mistakes.
- Specifying the difference between a contractor and an employee is also an issue. Both work for the company, but have different designations. An employee is someone who is hired on at either a salary or hourly rate. Someone hired on contract is hired to perform a one-time duty for a particular sum.
- Handling all of the accounting in-house to save money is a problem businesses face. While business owners may feel they could save on doing their own accounting, hiring a professional may save them more money in the form of their expertise in being aware of tax deductions or finding common accounting errors.
- Failing to reconcile the books with the bank account also makes accounting difficult. Business owners often skip reconciling the figures for the transactions listed in the books with the figures listed in the bank account.
- Poorly communicating with whoever oversees the books can create unorganized, sloppy bookkeeping. Properly communicating all purchases, both large and small, to the person assigned to keep the accounts is very important in keeping good records.
- Not having a budget for each project can lead to accounting errors. A budget prevents businesses from overspending, and it prevents business owners from not knowing where and how much money has been spent.
While other accounting problems may occur in the everyday business, the above issues seem to be ones that plague business owners.
Because of the time it takes to efficiently and properly account for all of the tasks involved in running a business, some companies find it easier to outsource some, or all, accounting duties. The main reasons most companies outsource their accounting are:
- Outsourcing allows the company to focus solely on running the business efficiently instead of using time to focus on other tasks related to running a business, i.e. accounts payable and payroll.
- As stated previously, by outsourcing the accounting, businesses can save money.
- Outsourcing prevents fraud because most small businesses do not have a person that can focus on irregular or abnormal transactions.
- Accountants are experts, and through their expertise, they find loopholes and exemptions that help businesses. A team of experts working on one or more issue can save companies money and time in the end.
While outsourcing is a great idea for mid to large size companies, a small business owner may not have the finances available to have experts work on the accounting. The person has two options. They can try and make the best of it or they can go to school to learn to keep their own books. Most university and colleges offer a bachelor’s in accounting, but that would require the individual to commit to a degree program. Of course, online schools have programs that lead to a degree; Maryville’s master of science in accounting is one example. A person could also enroll in a local college and take a series of accounting courses that would give them the knowledge but not a degree.
In the end, business owners have many options relating to their accounting methods. While the problems that businesses have with accounting are common, they are not difficult to solve, as there are a number of avenues a business owner can take if they are struggling with this aspect of running a company. In today’s fast-paced economic society, both outsourcing and training are viable and accessible options for businesses.