Want to know a secret?
Business owners don’t really like accounting. And they feel awkward dealing with accountants.
Let’s have a look at 5 reasons why.
1. Small business Accountants are stuck in the past
The basic process of accounting has remain unchanged for hundreds of years. Debits must equal credits. And accountants are trained on the technical nature of the accounting process. Of course it is critical for accountants to do their work correctly. Every business owner wants correct financial data. However accountants usually lack the general business awareness, experience and disposition to discuss business challenges with clients.
In fact 81% of accountants say they are NOT comfortable providing business advice.
It’s no wonder then that accountants remain focused on doing their tax-centric historical bookkeeping and accounts preparation work. And their clients miss out on having meaningful conversations about their financial performance.
There are modern accounting tools available such as online accounting systems (also called cloud accounting) that remove the drudgery and cost of basic accounting process work and enable the business owner to get fresh insights into their operations. But traditional accountants aren’t comfortable doing that, so they don’t.
2. Accountants speak ‘accounting’ not ‘business’
Accountants are professionals in their field. And that’s what they stick to. Most haven’t done other work outside of accounting and many don’t have experience making business decisions. And unfortunately (for clients) accounting firms rarely employ other non-accountants as business advisors. So, with the exception of some senior partners, there is usually a lack of practical business wisdom within most accounting firms.
That’s why most accounting conversations revolve around accounting terminology, reports and results. Business owners need to take it upon themselves to translate the accountant-speak into more practical language and concepts they can apply within their business.
Wouldn’t it be better if the accounting data was presented for the business owners use to start with? That’s why here at Pathfinder we’re big fans of using dashboards and indicators to translate financial data into everyday language for business owners.
3. Accountants want to charge for every minute
Like most professional services accountants are trained to bill clients in 6-minute increments. At the end of each day accountants need to report on where their time was spent. That’s why they record and invoice clients for every small action they take on your behalf. The whole firm is based on charging out as much time as possible.
The downside to this traditional approach is that clients are reluctant to contact their accountant for fear of starting a process they cannot stop and being billed for it. Even simple phone calls to ask a direct question are avoided because the client doesn’t want to incur more costs (especially when they don’t know how much they will actually be charged for it).
At Pathfinder we want to stay focused on were your business needs to be. That’s why we never use time-based billing. We know our business well enough that we understand what is involved, and empower clients to communicate with us under a fair use policy, so that our client never has to fear extra costs or struggle with unanswered questions. Our affordable fixed fee covers all the work we do with you each month.
4. Most accountants just do tax and compliance work
Tax accounting work is just the tip of the iceberg when it comes to managing your business. However it’s the easiest service for accountants to sell as just about every business has tax and compliance requirements to meet. Traditional accountants love the idea of doing all the number crunching and producing accurate reports or tax calculations.
But clients are often missing out on the power of using management accounting and financial accounting tools to drive their business success.
Financial accounting helps you understand the impact of financial flows within the business and how to manage the inputs to create better outcomes, and includes:
- Profit and Loss figures and key ratios
- Cash flow analysis
- Balance Sheet components
- Sources of finance and analysis of options
Management accounting helps you to analyse financial aspects of your business operations and make informed business decisions, and includes:
- Key elements of effective budgeting
- Understanding the impact of decisions on operating performance such as improving margins
- Improving day-to-day management of operations using real time data and dashboards or indicators
- Effectively preparing and presenting management reports for internal or external use
- Inventory management
- Preparing capital budgets
Even though these financial management topics may seem dry and boring (for all us non-accountants) the fact is the numbers can be managed to bring to life certain aspects of business operations that enables smarter business decisions.
In the modern market place you need all the insight you can get into how to create your future success.
5. Small business accountants haven’t earned the right to be a trusted advisor
For decades professional advisors, consultants and even sales people have been told they need to be their clients ‘trusted advisor’. The theory is that by providing extra value for clients and taking steps to understand what clients really need the accountant can become the trusted advisor their clients will turn to whenever they need to make significant decisions.
That’s great in theory.
However because of the four factors discussed above most accountants have not earned a position as their clients trusted advisor. Australian research has shown that while 6 in 10 business owners say they have a trusted advisor (which is most often their accountant), 82% of business owners do NOT have a plan for growth.
It makes you wonder: if the accountant was truly doing their job as a trusted advisor why do only 18% of their clients have a plan for growing their business?
The answer is simple…
Pathfinder Advisors was founded on the premise that we want to deliver for clients what most other accountants fail to do. And that is to help our clients grow and improve their business while looking after their compliance and tax accounting needs.
Every client receives a 12-month action plan to guide business improvement activities, backed up by regular financial analysis and meaningful review consultations. As part of our fixed fee services we draw on a broad base of business knowledge and apply financial accounting and management accounting tools as a regular part of our work. We’re with you on the journey.