Complete Business Startup

Accounting & Bookkeeping - Necessary Evils of Business

Accounting and bookkeeping functions within a business are often viewed by entrepreneurs as a necessary evil; something which is often mandated by law, but which provides very little benefit to the success of the business.

The typical entrepreneur when starting a business might have ideas of devoting the majority of their time to sourcing supplies and provides goods or services to an ever expanding customer base.

In reality, as the business grows, there is often an increase in the ancillary accounting and bookkeeping facilities which are set up to comply with say reaching and surpassing the VAT threshold or paying salaries for the first time, which requires accurate PAYE and NIC calculations and timely payments to HMRC.

The Companies Act and the plethora of UK tax laws demand that businesses of all stripes deliver financial statements and the resultant tax computations to HM Revenues and Customs and Companies House (for incorporated entities).

The timescales for delivery, typically nine months following the reporting period frequently render the financial statements useless to the business which not only is aware of the results for the period in question, but is actual approaching the close (last quarter) of the following year.

Most entrepreneurs are aware of the financial status of their business through regular cash balance analysis and through having a general feel as to whether profitable activities are taking place.

Accounting and bookkeeping activities often serve only to confirm, not enlighten the views on the profitable health of the business.

Whether the accounting and bookkeeping functions are conducted in-house or externally, they still represent a cost to the business and detract resources from the purchasing, advertising and eventual selling of products or services.

It would be irresponsible and completely wrong to advocate a one-sided argument that accounting and bookkeeping are simply a necessary evil. Financial statements have been responsible for detecting fraud, highlighting liquidity problems and providing consistent comparisons of current and previous year’s performances.

In essence, the preparation and distribution of accurate accounting and bookkeeping information forces the entrepreneur to make calculated examinations and determinations of the business’ results and standing.

Informal observations and inquiries, such as those which involve occasional glances at bank statement might only result in a partial view of overall business performance leave substantial portions of the operating conduct unscrutinised.

Given that there are no means of avoiding accounting and bookkeeping functions within a business and on the basis that they are deemed to be necessary (evil or otherwise), the efforts to be made would perhaps be made in the direction of efficiency and cost-effectiveness.

Utilising computerised accounting and bookkeeping might decrease the time and inclusive cost implications whilst aiding the entrepreneur by providing more timely information and prepared dissection of the financial activities of the business.