We are living through a period of unprecedented …. and accelerating change.
Our parents and grandparents are products of the industrial revolution. But the social and technological changes brought on by the information age have made the memories of our childhoods seem quaint as though they were from a different, almost alien civilization.
Check out the 10 largest US companies in 2018 and compare them with the same list for 2008. In 2018 the top 5 companies are ALL technology companies. In 2008 only Microsoft made the top 10.
Today financial transactions begin life electronically. In 1985, according to the Canadian Payments Association (now ‘PAYMENTS CANADA’), 97% of payments were made by cheque. By 2018 that number had declined to 14%.
Transactions now begin life as digital or electronic records.
In fact even cheques are available for download (or at least electronic images of cheques) from our online banking systems.
That means we don’t need to record transactions, we need to capture them and organize them electronically. The traditional role of the bookkeeper was to transcribe (or “record”) paper-based records of transactions into “accounting journals”.
In fact the bookkeeper has virtually disappeared. What we used to call bookkeepers are using software to perform accounting functions – and somewhat more ominously – prepare tax returns (a recent study by K2E Enterprises found that 73% of ‘Certified Professional Bookkeepers’ (“CPBs”) and non-designated accountants file corporate tax returns on behalf of their clients).
Today’s small business has much better technology at their disposal – however the underlying complexity is actually much greater than ever before. Small businesses should concentrate their efforts on improved file-sharing capabilities and better record-keeping, instead of attempting to learn the basics of accounting themselves.
Fully 25% of companies with 11-25 employees have a full-time CFO or controller.
Of course 90% of Canadian businesses have 9 or fewer employees. In fact 80% have 4 or fewer employees. For these small businesses a full-time accountant is almost certainly overkill.
Most require timely billing and collections. Very few would get very much value from receiving accurate monthly or quarterly financial statements.
As their businesses grow, their need for timely financial information increases. Initially, outsourcing to a CPA in public practice or a part-time controller is common.
These days many CPA firms employ certified professional bookkeepers to make up for shortages in professional accounting staff. However CPBs should be considered as part of an accounting team – not a replacement for tax professionals.
For most very small businesses, keeping up with billing and collections is the primary need. This is something business owners can – and should – do themselves.
The CRA requires that tax preparers disclose whether or not they have an accounting designation (see NOTES CHECKLIST above). They don’t ask whether they are professional bookkeepers.
Most companies with between 26 and 100 employees employ full-time accountants.
What’s more – 71% of these companies companies still outsource their tax work work to CPA firms…
In fact tax work is actually a specialization within the accounting profession. In larger firms there are many tax specialties:
- US and cross-border tax
- Transfer pricing
- Indirect tax (GST and PST)
- SR&ED tax credits
- Film tax credits