4 Ways Do-It-Yourself Accounting will Tank Your Business

If you’re not convinced, consider the four ways that DIY accounting can limit your company’s growth  — or worse, take your company down as you try to grow:

1. Just Keeping Score.   Accounting is a powerful tool for management to run a business.  A properly designed accounting system will help you answer not only “How were our sales in January?” but also, “What are the efficiency bottlenecks in my business?”   A good accounting system is more than a scorekeeper.  If your accounting is DIY, you won’t know what you don’t know.
2. Inadequate Government Compliance.  It’s much easier to let government compliance slip with DIY accounting.  Issues can arise with sales, payroll, and business property taxes, among other areas.   Great accounting systems alert management of compliance needs and provide the information necessary to maintain compliance.
3. Poor Cash Management.  By far the leading cause of business failure is poor cash management. The larger a business grows, the more sensitive it can be to improper cash management.  A properly designed and implemented accounting system can give current and future views of cash to maintain adequate liquidity. Just knowing how much money is in the bank right now is not good cash management.
4. Missing fraud.  The Association of Certified Fraud Examiners estimates that an organization typically loses 5% of its annual revenue to fraud.  That is just a typical company average.  We’ve all seen news stories where a company loses much more than that, sometimes to the point of insolvency.  What’s more, it takes an average of 18 months to detect and address any fraud issues.
   A proper accounting system (are you starting to see a trend here?), when effectively designed and administered, can significantly reduce or eliminate fraud.

So what’s the answer if your company has grown and is experiencing pressures due to weak or incomplete accounting?  Engaging the right professional is vital.  Interview several prospects.  Choose a professional that has experience with your industry, your company’s size, and the challenges your company faces.

The right professional will be able to look ahead and advise you of issues that may be potential risks in the future.  And, on a more positive note, he or she will also provide the kind of guidance that will help your business grow.

Dedicated to your success,  Dan

Dan Gotte is a CMA, CPA and partner at FUSE Financial Partners. He’s available to help small companies break out of the DIY accounting traps by deploying simple and powerful finance procedures, metrics and reporting.

photo credit: My Tools 5 via photopin (license)