SMEs Accounting Tips

Generally, SMEs appear to appreciate the least the need for good accounting system.

One of the reasons frequently cited is that qualified accountants and the elaborate structures which go with them are far too costly; that the costs outstrip the benefits.

SMEs also fear that the greater transparency resulting from good accounting systems will expose them to higher tax liabilities.

The fact is SMEs need good accounting systems probably even more desperately than the bigger organizations due to inherent risks arising from (among other causes);

• Lack of separation of ownership and management
• Blurred lines between family and business relationships
• Existence of informal governance practices
• Impracticability of elaborate framework for controls and reporting e.g. segregation of duties.

To counter these risks SMEs should strive to

• Separate the business assets from own assets particularly so the business cash
• Operate a separate business bank account.
• Always bank cash takings and whenever possible settle all bills by cheque. This shifts some of the accounting responsibilities to the bank.
• Where major bills have to be paid or purchases made for cash, draw exact cash from the bank for the particular purpose.
• Otherwise to operate a petty cash system to meet daily expenses. Every coin taken from cash box to be accounted for and receipts filed ASAP latest by the next business working day
• Account for all inputs i.e. investments into the business
• As much as possible, assign a cost to all resources put into the business including own time, that of spouse and other family members, rent for part of home used for business, maintenance and fuel for personal motor vehicle used for business etc.
• Account for all drawings, whether cash or in kind
• Put in place a formal structure if only to clarify custodial responsibilities for the organizations assets for instance and most importantly cash.

It is vital that SMEs recognize accounting as their invaluable management tool. It is essential for safeguarding of the organization’s asset, and for ensuring their efficiency and effectiveness in utilizing resources.

In turn, this enhances the SMEs’ competitive edge in order to survive and to compete with the large corporates who have more going for them in terms of economies of scale, ability to raise capital and to recruit highly qualified staff.

On Accountants and ICT

At the beginning of the ICT (Information & Communications Technology) revolution, every one feared they were going to be replaced by computers and robots at their work place. Accountants were particularly acutely aware of this possibility.

A particular school of thought was that with development of ICT, the Accountant would eventually become irrelevant as there would be no sales and purchases day books and cash books for him to write up. The argument was that everyone and anyone would be able to keep their own books and get all sorts of reports at a click of a button.

Today however, one might be inclined to think, that these fears were unfounded since the Accountant is as relevant as he has ever been if not more so.

Personally, I attribute the accountant's survival partly to the fact that, on a professional level, he has made conscious efforts to keep himself relevant.

This he has done by keeping abreast with ICT developments. By being pro-active has transformed himself from merely writing–up books to becoming a consultant on financial and other information systems. A quick look around will vouch for me. The accountant has succeeded in turning ICT to his advantage. It has become his tool and works for him. Contrary to earlier fears it actually keeps him on the payroll!

On an individual level, you, the accountant, must do your bit to ensure your survival. In the information age, for a finance person to be of use to his employer or clients, he needs to thoroughly understand the Information Systems in place that will enable him to glean any morsel of information that might be of use. In addition, he must use said information appropriately including presenting it to other decision makers in the best way possible. He needs also to know what other good ICT tools are out there in the market for his own use, and for his employer or clients.

Therefore, the present day successful accountant must have the relevant ICT skills at his finger tips for broadly two reasons:

• To give advice on and participate in putting in place good ICT systems for his employer/clients for their own use
  
  
• To be able to use such systems to his best advantage in order to churn out relevant information for his own consumption and for other decision makers to make informed and timely decisions

For my part, I make a special effort to keep up with the times...and I am not regretting it one bit. I guess the old saying, "use it or lose it" applies here.

Right? :-)

Welcome to my blog

Hi there!

Thanks for visiting my new blog here in cyber space.I plan to write on topics relating to Accounting, ICT, and any other stuff that's of interest to me at the moment. However, if you have a particular aspect of accounting (as it relates to ICT) that you would like me to cover, please don't hesitate to post a comment below. I will do my best to accomodate you. By the way, this blogging thing is new to me, so please be patient.

On another note, please say hello to the newest addition to our wonderful family. When we got Alexa about a week ago, she was the weakest kitten in her litter and nobody knew if she was going to make it. But now, look at her! She's made a remarkable recovery and now, happily, gets herself in trouble around the house. :-)Enjoy.