Accountants: Teach Your Clients Well

Question mark over pile of moneyRecently, I spoke with a Certified Public Accountant about a mutual client. This CPA prepares the client’s tax return. I was helping the client overcome some serious cash flow problems. The CPA told me that he wants the client to use QuickBooks mostly as a checkbook and he, the CPA, will “take care of the rest.” Although I have a high level of respect for CPAs and the accounting profession as a whole, on this topic we definitely disagree.

Using QuickBooks as a checkbook means the business owner understands only the barest fundamentals of the financial side of running a business: deposits (money in) and checks (money out). The main reason businesses end up with cash flow problems is because of a lack of understanding and knowledge of finances on the part of the owner(s).

To my way of thinking, an accountant who doesn’t educate his or her clients is no different from a doctor who doesn’t educate his or her patients. Can you imagine a doctor who diagnoses a patient with diabetes and then says eat whatever you want and I’ll treat you when you eat yourself into a coma?

So many of the CPAs I have worked with seem to be on automatic pilot when it comes to educating their clients. It’s easier to clean up the messes, do the taxes, and take the check. This is a great disservice to the small business clients that are the bread and butter of not just the CPA firms but also the national economy.

Think about these statistics from the Small Business Administration:

There are over 27 million small businesses in the United States.

  • Those businesses generate most of the nation’s new jobs.
  • They employ more than half of the nation’s private sector jobs.
  • Most innovations spring from small businesses (think Jobs and Wozniak of Apple fame.)

With such a huge impact on the nation’s economy and on individual communities, it seems that having an educated small business owner is in the best interest of all involved. So why sell them short when it comes to understanding finances? Here are the top two reasons I hear from accounting professionals:

  • It’s much easier to just clean up behind a business owner than it is to try to educate him or her.
  • Business owners don’t want to pay for financial education.

Let’s debunk that first myth right away. It’s easier to change a toddler’s diaper than it is to potty train one. It’s easier to let the kids eat candy for breakfast. It’s easier to pass Jimmy on to the next grade than it is to teach him. Where does that mentality stop?

Now on to the second reason. Business owners don’t want to pay for financial education. As someone who has taught financial concepts to hundreds of business owners and future business owners, I can tell you the smart ones are willing to pay for good financial education. And I can also tell you that I’ve helped scores of business owners deal with cash flow issues and the only way out of that quagmire is through education. And they accept it willingly. The most common comment I get from business owners is “why didn’t anyone ever tell me that before?”

There is a two-fold responsibility here. First and foremost, business owners need to realize that a solid understanding and application of sound financial management is needed to create a successful business. And secondly, accountants and bankers need to learn to communicate more clearly the vital financial knowledge that can so vastly improve their clients’ success rates. Putting the two pieces together creates a strong partnership that leads to success for all involved.

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