One of the often glossed-over weaknesses of small- and medium-scale enterprise (SME) entrepreneurs and professionals who are earning well or have good cash flow is accounting, or how to handle one’s money well.
I think more so in government, which has more lawyers than either accountants or engineers, basic accounting is the Achilles heel of many well-meaning or otherwise outstanding politicians. Is this one of the many possible reasons for the ongoing pork barrel mess of unaccounted funds and now very angry taxpayers? Of course, a deficit in moral values is a grave non-accounting deficiency of not a few of our politicos!
Many entrepreneurs, professionals and even political leaders mistakenly think that accounting is an esoteric, boring or alien subject, like most laymen would think of space science, thus allowing even the most basic accounting to be inefficiently handled.
I recommend that all entrepreneurs, professionals and anyone else handling money especially our politicos, who handle billions in taxpayers’ funds study simple, basic accounting for non-accountants, or else a lot of money will go to waste, turn business or professional profits into losses, and public funds into plundered funds.
By the way, Chief Prosecutors’ Association of the Philippines president and Manila City chief prosecutor Eduardo “Ed” Togonon and his group told me that “to demand for better financial transparency and fairness in allocation of all government pork barrel funds,” he is inviting all prosecutors nationwide to join the Aug. 26, 9 a.m. rally against the abuse of pork barrel funds in Rizal Park. The meeting place will be the Department of Justice (DOC) building. He said that 60 to 70 percent of all prosecutors nationwide have no decent Halls of Justice and their “repeated appeals for help from legislators and the Department of Budget have always been ignored.”
Here are five tips for small business owners, professionals and even politicos on how to better handle accounting with input from Kirk Simpson of Wave Accounting in his Forbes magazine article:
1. Keep business and personal finances separate. Years ago when I started out as a real estate broker and was doing well, I focused so much on making record realty sales but often neglected basic accounting. There were even times when check payments to me had become stale in my wallet because I forgot or simply had no time to deposit. I also didn’t separate my personal and professional expenses, nor did I have financial analysis. There’s no need for an accountant or bookkeeper for us to do this.
Eventually, I hired a trusted person to be my bookkeeper and to go to banks, even when I was on my own as a realty broker and not in business then. Now as an SME realty entrepreneur, I have two hardworking and honest accountants among my office staff just handling all money matters, with me signing all the checks. My personal and business expenses are strictly separated, and I pay myself a salary as well out of my business although I own it 100 percent. I always keep separate bank and credit card accounts for business and personal expenses to minimize the work of my two accountants.
Many family-run small businesses and professionals, whether doctors or celebrities, and sadly, even politicians, do not have the self-discipline, system and staff to separate their business expenses from personal and family expenditures. How can we gauge or accurately measure our business or professional efficiency and productivity if our business and personal finances are mixed up?
If a business has investors or partners, lack of independent and separate accounting for the entrepreneur’s business and personal expenses will surely result in future conflicts, unnecessary misunderstandings and crisis. In government, politicians should also separate official and personal expenditures as a matter of honor.
In the case of the controversial Janet Napoles and her non-governmental organizations (NGOs), I think non-stock and non-profit foundations should also follow normal accounting procedures in order to be credible and financially viable, and strictly separate organizational expenditures from personal and family expenses. Is there not a government agency or an NGO auditing body that can monitor and check on the finances of NGOs or foundations to prevent scandals and outright thievery?
Government offices of the president of the republic, legislators, governors, mayors, barangay chairmen, government corporations, judiciary officials and even religious or school organizations also need to instill the discipline and tradition of basic proper accounting: separating official and personal finances.
2. Consult professionals. I highly recommend that no matter how small a business is, even if it’s a professional practice by a salesman, doctor, dentist or movie actress, etc., it is best to consult a good accountant outside your office staff for a periodic review of your finances, to plan your tax payments. Accounting firms are not only for the SMs or the Ayalas but also for SMEs or professionals.
3. Review finances at least 15 minutes once a week. We entrepreneurs, professionals and political bosses should set aside personal time even if it’s just a half hour or less to personally go over our finances at least once a week. It’s like doing basic cardio-vascular exercise three times a week or going to church every Sunday a must we should do and not have excuses in our minds to put off. If we use up so much time for Facebook, Candy Crush, Twitter or Instagram daily, why not set aside a minimum of 15 minutes every week to go over our finances?
Our excuse is “no time”? My reply is: We always have time for the things we put first or prioritize, so no alibis and no excuses for not studying our finances once a week!
4. Consider your staff or employees. Often, human resources or people are the most valuable asset of businesses, even big ones. Most small businesses, like mine, do not have full-time human resource or personnel departments handling staff or employees, but this is no excuse for not computing our labor costs. We ourselves or our in-house accountant or assistants should not forget to properly monitor and study one of our largest business expenses: labor.
It doesn’t matter if we are paying for secretaries, drivers and employees or only you the professional as the only person on the payroll; we must efficiently monitor the full costs of salaries, benefits, overtime and any other labor expenses.
By better understanding our labor expenses, we can think of ideas on how to add incentives, bonuses or benefits for our people, and we can also discover if we are overspending on salaries or wages beyond our optimum business budget.
5. Don’t forget to collect payments! Billionaire business leader Lucio C. Tan told me several years ago that one of his idols is ancient Chinese tycoon and statesman Tao Zhu Gong, also known as Fan Li, of the Spring and Autumn Period circa 500 BC. In Tao’s 12 golden rules for business, his rule No. 6 was: “Ability to control credit. Do not allow nonpayment. Make sure you collect what is owed.”
Many entrepreneurs like me tend to be marketing persons whose overriding focus is often on closing sales or making deals; in so many instances, our weakness is in accounting. This cardinal rule of business to collect payments is often shockingly not accomplished by many SME entrepreneurs and professionals.
This part of finance is all-important, so we need to always monitor, organize and have proper records of all invoices and client payments. One good way to minimize headaches is to request postdated checks or other guarantees.
Whether for a small business or a professional, chaos in record-keeping and basic accounting will cause a lot of booked sales or done deals to go to naught if we fail to collect payments. Collection of payments so often spells the big difference between sustaining success or degenerating into mediocrity, so let’s collect!
source: philstar.com