Accounting weekly

Accountants: You Might Be Doing Too Much

The risk of over compliance is causing non-compliance. As accountants, we need to remember that doing too much is just as dangerous as doing too little.  
 
It’s an all too familiar story. A small business owner or NPO director reaches out to an accountant to get their books in order. The accountant takes one look at what they consider a mess, and it compels them to not only fix matters but to go above and beyond what’s required.  
 
The problem is that this compulsion is not always helpful. Many accountants make the mistake when working with SMMEs of trying to meet the auditing standards required of a large firm instead of the lower standards applicable to smaller firms. 
 
More often than not, these unrealistic and inapplicable standards put off small business owners who budgeted for accounting, not auditing, work. An accountant may encounter shoddy bookkeeping and say to the business owner, “You didn’t keep a record of all your transactions, I can’t file an annual return until you redo your books.” This approach is wrong. Accountants can file returns as long as they note the non-compliance. 
 
This over-compliance approach often comes from a good place. Accountants were taught high standards by universities that hope that these high standards will trickle down. Many accountants also have personalities that drive them to seek order and avoid chaos. However, these standards and drive to perfection don’t align with the messy reality that is South Africa.  
 
This country is a tough place to start and run a small business. With less than six million taxpayers carrying a population of 60 million on their shoulders, accountants should make compliance for SMMEs as easy as legislatively possible.  
 
Rather disclose to clients that you’re setting them up with the lowest level of accounting compliance and standards and that, while it won’t be helpful for economic decision making, it will get the job done so they can focus on the running of their business. Accountants can always add higher standards and complexity later as needed.  
 
Lastly, it’s important to remember that accountants also open themselves up to risk by over compliance. If an accountant exceeds their mandate, a court may later ask if this is an indicator that the accountant doubted the integrity of their client, and if so, why didn’t the accountant then do more? 
 
In conclusion, SAIBA believes in contextual accounting rather than burdening South African small businesses with standards that hinder growth.