You can't run a business without accounting - at least not without headaches. You can run a business without becoming an accountant - but you do need to understand the basics. You might think your software can do it all - but it is only as good as the way it's used. You can get someone else to do it all. That will cost you, but free you up for more important tasks. However, it may still get you offside with IRD (which can be expensive) if the other person gets it wrong.


Even if you did that, you'd still have to collect and collate all of the information and deliver it to the person doing the accounts. It's always a good starting point to keep separate bank accounts for the business from your personal accounts. (These days most accounting software offers bank feeds to save time.) Plus you're still responsible for accounts and taxes, even when you use a third party. That's why it helps if they have professional indemnity insurance.


What does accounting cover anyway? Well, the first thing most people are interested in is selling stuff and getting paid for it - sales and debtors. The other side of this is buying stuff and paying for it - purchases and creditors.  And then there's keeping track of where the money's coming from and to where it's going. Generally, that's done by some sort of cash book or preferably s general ledger.


Of course, some of these things raise other issues. For example, not everything that's purchased is for sale. Some of it is to keep the business running (e.g. power), and some of it is used to run the business for several years (e.g. assets such as a car). These things often involve finance arrangements, and the main cost is not allowed directly as a business expense, but through depreciation allocated over the estimated useful life of the asset.


Then there are other complications required by the IRD. GST is one such thing, as is personal "wages" from your business. And then there are special rules around items with both business and private benefits, such as FBT.


All in all, it's complex - despite the government's wonderful "tax simplification". It's certainly simpler than say the USA - even our GST is simpler than across the ditch. But lack of knowledge is no defence - so relying on advice from "down the pub" can be risky for your business.




How can you get someone who knows their stuff and will look after your interests first rather than theirs? Many people look for an accountant - which is a good start. If you think this is complex, many people in the USA use a tax attorney, reflecting how complex their systems are.


Anyone - even bookkeepers can call themselves an accountant. Some do an adequate job, so how can you tell if someone is a good accountant or best avoided. I've seen accounts done by people who don't even bother to check the balance (under double-entry accounting one side says where funds are from, and the other where they have gone), let alone make sense and have reasonable checks on the transactions.


Professionals are either Certified Public Accountants or Chartered Accountants - but so what? They have rules and standards to follow (including continuing education), and disciplinary committees to enforce them. They require their members to have professional indemnity insurance. That doesn't mean they are all perfect (the occasional court or disciplinary case is testimony to that), but all offer the same basic services. But it does ensure you have a higher chance of getting a minimum standard of service.


Sadly even professionalism is at times sacrificed. For example, many put all clients onto a specific accounting system, rather than looking at what's best for a particular client.


Whatever system you use it must be updated to agree with the filed accounts. Without starting each year from the same position as last year ended, extra work is required. Cloud systems have advantages and disadvantages, and this is generally easier with cloud systems. I say generally because there are always people who find a hard way to use any system.