Small business owners should avoid abdicating total responsibility for the financial side of their businesses to an accountant although they may feel they don’t have the time to do it, says Faith Ngwenya, Technical and Standards Executive of the South African Institute of Professional Accountants (SAIPA).  “Entrepreneurs, naturally, tend to devote most of their time to making money, but may neglect the way their money is managed, entrusting this function to an accountant or tax professional,” says Ngwenya.

“Whilst they are in relatively safe hands if their chosen professional is registered and accredited with a recognised professional body, business owners should have a rudimentary understanding of accountancy and be able to simple read a balance sheet to maintain a holistic view of how the business is performing.”

Recognising the roles and scope of different accounting professionals is a first step in selecting the right person for the task. A bookkeeper provides an essential, but relatively basic, service, whereas a professional accountant must add value to the company’s figures by taking them from a trial balance stage and then presenting them in a complete set of financial statements that have been signed off.

“Although there are exceptions, a bookkeeper does not qualify as a professional accounting officer in terms of the Close Corporations Act and as such cannot sign off the financials, would not ordinarily compile a company’s financial statements, as he or she is, by definition, a record keeper, not versed in analysing and interpreting figures,” says Ngwenya. “Furthermore, a bookkeeper is unlikely to be up-to-date on the latest legislation or professional accounting practices since these are not relevant in their sphere of work.”

Similarly, she adds, a bookkeeper is not a tax professional, although a professional accountant may be. “A bookkeeper slots figures into empty blocks,” she explains. “Completing a tax return is more than placing figures in boxes. The tax professional has to apply tax legislation and, when submitting the necessary forms, is making a statement to the South African Revenue Service (SARS) on behalf of his client. SARS will hold him responsible for that information and he risks a jail sentence if he misrepresents the client or tries to bamboozle the revenue inspectors.”

Whichever consultant a business uses, SAIPA cautions that it is in the business owner’s best interests to know the basics of accounting and to review the work of his bookkeeper and accountant for anything that seems odd. “The business owner would notice if a piece of machinery costing R50 000 appears on his books at R55 000,”says Ngwenya. “It may well be an innocent mistake, but it could be an indication of something more serious.”

“Business owners should question anything that doesn’t make sense, as they are ultimately responsible for any penalties or interest levied.”

“It is imperative that the business owner takes ownership of the business in its entirety,” Ngwenya concludes. “He or she is liable should penalties or interest be incurred because submission dates are missed or information is incorrect. The accounting buck stops with the business owner.”