WHAT IS THE PERCEPTION OF FINANCE AND ACCOUNTING

Small business owners and executives are compelled to wear many hats in carrying out their duties as leaders of a business organization. Often the accounting/ finance hat is the one most avoided. The small and emerging company’s survival depends largely on the health of the finance function. Knowing this, any trepidation about handling issues that affect the finance/accounting function must be overcome before a tendency to avoid finance issues becomes a culture of neglect. Reluctance to address the finance function properly often stems from misconceptions and half-truths—these are dangerous because, left unchecked, they eventually will lead to bad decisions. Common misconceptions toward the finance function borne by small and emerging business owners are often expressed in one (or more) of five ways:

1. Accounting and reporting are administrative/back-office functions not considered the front lines, so who cares? The reality is the accounting/ finance function underscores virtually all aspects of the front lines of any business enterprise, whether it dictates the language of sales contracts, defines customer payment terms, or helps determine sales quotas. Unlike most areas of a small and emerging business, finance decisions may not yield that rush of instant gratification or obvious benefit. In fact, the return on investment (ROI) on a finance plan or investment in infrastructure maybe long term and/or extraordinarily subtle. This notwithstanding, the finance function is no less important as a primary driver for the organization.

2. Between consultants, applications, and hardware, the accounting func tion is a money pit. This is often the case with poorly thought out infrastructures or myopic strategies—a symptom of many emerging companies in swiftly moving industries. Decision making as it relates to information systems and applications must have a mid- to long-term focus. The speed at which software and hardware becomes obsolete forces organizations to face the same purchase decisions over and over again. When it comes to accounting and finance software packages and the technological platforms that drive them, user needs must play an equal or greater role in the purchase decision process.

3. Accounting and finance issues are simply too complex to deal with. Rather than dealing with them incorrectly, I’ll just ignore them. These issues almost never become barriers to the business when they are identified and dealt with early on. Understanding the business itself and having a solid idea of the strategic direction go a long way toward addressing accounting and finance issues, whether they are changes in accounting/disclosure rules, infrastructure issues, or data availability issues. Knowledge of the business, the industry in which it operates, and the status of industry peers give the business owner the opportunity to at least recognize when a questionable finance issue is encountered. Sometimes it is just as important to know when to ask a question as how to answer it.

4. As long as I have customers and revenues, the accounting will take care of itself. Customer generation and retention may be the direct result of how well the company costs and bills customer jobs—a major part of the accounting and finance area. In this and other ways, the finance function dictates how effectively the organization approaches prospective customers and handles existing ones. Skill at budgeting and forecasting will drive positive relationships with suppliers, and the ability to close the books company-wide will drive positive relationships with owners, shareholders, and analysts.

5. I simply do not have time to deal with the accounting function. I have to get revenues now or I am finished anyway. The fact is, everybody is busy. The business owner can deal with the accounting and finance function now or wait until a problem arises as a result of neglect and put the fire out then. Short-term thinking is a slippery slope where many executives lose footing, especially if the company is publicly traded and has quarterly earnings expectations. Many executives and business owners see shortsighted decisions as the better alternative to neglect. This may be so; however, engaging in short-term decision making may be ultimately as damaging to the organization.