Myths and reality in accounting | Which are the most common?
Ecovis | 29 January 2025
How often do each of us fall into the trap of misconceptions about accounting?
You've probably heard that accountants only fill in tax returns. Or maybe you believe that to be an accountant you have to be a mathematical genius?
Well, we at Ecovis Bulgaria are here to debunk these myths and reveal to you all the truths about accounting.
If you want to learn how accounting can change your business and how you can avoid financial mistakes with its help, read on.
Myth 1: Accounting is for big businesses only
The truth is that bookkeeping is vital for any type of business, be it small or large.
Whether you have a large company or a small shop, proper financial management is the key to success. Ignoring accounting is costly and leads to a number of confusions and unsolvable problems.
Small business owners often overlook the need for expert help to perform accounting services. And this is what leads to big financial "shocks" later on.
Accounting helps you keep a close eye on your income and expenses. Without it, you're in a fog. And the chance of finding out if your business is growing and developing is minimal.
Plus, good financial organization allows you to make informed decisions that lead to secure growth.
Myth 2: Accountants only deal with taxes
Yes, while a good portion of accountants' duties are related to tax returns and tax services, that's not all their job.
Each accountant analyzes the enterprise's revenues, expenses, and budgets.
Professional accountants also offer financial projections and help plan for opportunities and obstacles facing the business.
And no, accountants don't just track numbers.
They have a strategic role. Their insight into your financial situation manages to offer solutions on how to optimize your spending and maximize profits.
Last but not least, accountants can detect "hidden" trends in budgeting. For example, if they notice that your costs in a particular sector are increasing significantly, they can alert you in time.
And so you can take action before things get worse.
Myth 3: You have to be a mathematical genius to understand accounting
This myth is quite common. But the reality is quite different.
Accounting does not require sophisticated mathematical skills, but logic and organization. Think of it like solving a puzzle - when you have the right knowledge, things work out. And the puzzle is easy to sort.
Today, there are numerous programs and smart tools that simplify complex accounts and processes.
What really remains important and matters is the ability for an accountant to interpret data and understand how it impacts the business.
Accounting is not a "high flying" kind of job. And accountants don't need to have passed all the units of higher mathematics.
And as mentioned, there are already "smart assistants" that make complex accounts easier. What remains important for experts is the ability to organise information and manage to weave meaning from it.
Myth 4: Accounting is only about accounting entries and classifying financial transactions
Accounting entries and bookkeeping are interrelated but are distinct processes.
What's the difference, you ask?
Accounting records track every financial "step" you take. Accounting, on the other hand, analyzes that data and turns it into useful information for decision making.
If we can put it simply - the accounting entries are the ingredients the chef (accounting) needs to cook his dish.
Both are important. Both are needed to get the full picture.
Let's not forget that accounting involves devising strategies for improvement. Every decision is based on data and is made with the goal of a better financial future for the business.
Myth 5: Profits equal cash flow
Having a profit does not automatically mean that you have enough money in the till. Cash flow management is just as important as profit.
On paper, it may look like you have incredible earnings, right? But if payments slow down or expenses rise, you'll find yourself in a bind.
For example, if you have a lot of customers who pay late, this could lead to a lack of finance in a given period.
At the same time, regular cash flow monitoring can help you deal with such situations in a timely manner.
Myth 6: You can only manage accounting with an app
Yes, there's no denying that online accounting apps like QuickBooks and others are great helpers. But they can't replace human expertise.
The accountant has experience and knowledge that technology cannot offer.
Automation makes our lives easier, but it doesn't understand specific business needs like an expert would.
The key to success is balance.
In addition, the human factor contributes creativity and strategy. While apps are great for mechanical tasks, they can't offer advice or solutions to non-standard problems.
Accounting - a pressing need for businesses
Accounting is the foundation of any successful business.
Believing myths only prevents us from getting the most out of it. Don't underestimate the role of experts. They are the ones who help us organize, analyze, and manage our funds efficiently.
Awareness is the first step to better managing your business. If you want your business to grow, ignore the myths and trust the expertise.