The Similarities between changing your engine oil and maintaining your accounting system…
No, this is not an article about motor maintenance; however, maintaining your accounting system is similar to changing the oil in your car. In short, if you don’t maintain them both, they will cost you more money in the long run. Why? I hear you ask. Well, it’s simple. As the oil becomes old and more water like, the lubrication is less effective and the engine wears prematurely as a result. The same could be said for your accounting system. If your books of accounts are not maintained, they will cost you more in the long term especially if used for management accounting purposes.
For example, we were recently approached by a lady who had been successfully running her company for the previous twelve months and needed her accounts filed. Her bookkeeping was completed by her husband. “Everything is complete”, she said. “All you need to do is sign and file the accounts with the Companies Registration Office.” Nothing could have been further from the truth. We received the ‘shoe box’ of receipts along with a folder of bank statements, minus two months! As for the accounts, well let’s just say that unfortunately the Companies Registration Office don’t accept multiple sheets of handwritten notes with figures! After reviewing the file we quickly came to the conclusion that the only way to proceed was to start the whole job again. Of course, this work has to be reflected in the price, much to the consternation of the client who believed that “everything is complete”.
In summary, the point that I’m trying to make is, don’t waste your time trying to cut corners on accounting fees, as it really is a waste of time! It also leads you into a false sense of security, thinking that everything is fine when, in some cases it’s not!