Let’s talk about accounting. Ugh, how boring right? Wrong.
My perspective on the field of accounting has changed
completely since coming to Nicaragua. I graduated with an accounting degree
from University of Maryland and for four years straight I too thought of
accounting as a relatively boring subject. It wasn’t until I came here and
began working with local businesses that I gained an appreciation and respect
for my accounting degree and the business knowledge I have because of it.
Very few businesses here have any sort of accounting or
record keeping. The majority of businesses have no idea if this past month was
a profitable month or not. How is that possible? What is common “business”
sense to you is not common sense to everyone. Money and sales are not recorded
in any sense of the words, the money comes in, goes into the owners pocket or
drawer, and then goes out the same way. If you need money for groceries, bills,
or business supplies, you reach into that same pocket. If at the end of the day
you can still pay your staff and are not going to sleep hungry then you have
had a successful day.
Unfortunately, that is not how business works. Many of these
owners have several income generating businesses and all the money goes into
the same pocket. The family I live with has the following sources of income:
Hotel rooms (short term and long term), homemade ice creams, fresh fruit
juices, a restaurant on weekends, and even a mechanic shop. What are the
chances that all these businesses are profitable and that all the products
(thinking about all the various costs) are sold with a profit if not one of the
businesses uses any system of accounting?
I spend a fair amount of time teaching business owners about
accounting, its importance, and ease (we use a very basic level of accounting).
This allows many of these businesses, many having been in business for up to 30
years, to see their income for the first time. Together, we understand all the
costs for each individual product (ex. chicken plate for dinner = chicken,
seasoning/spices, wood/coal for grill, gas, rice, beans, oil, vegetables,
(etc…) and a percentage of all the fixed costs) then bump up the price and
reset the old price for the new one.
Many owners have been using the same prices for years, not
adjusting for rises in costs. Last week I had a meeting and because an owner
was concerned with her accounting and wanted my help. A community-run
restaurant has 13 different employees who work alternating shifts during the
week. Each employee records the transactions during their shift. However, each
does so in their own record book, in their own style, not one with any
accounting knowledge, and a few can not read nor write. The first thing I did
was picked a random transaction out and found that the juice boxes they buy in
packs of 24 are being sold at a loss when sold individually. Every juice box
sold results in a loss because they have not updated prices as costs have
risen. At the same time, so many other businesses are selling this juice box
for this same at-a-loss price that I know that each of them are losing money as
well.
A hostel around the corner solicited my help with their
accounting the other day and they are using excel spreadsheets to record
transactions – purchases, daily income, payroll, and a monthly summary. Here
again, the very first transaction I picked I had found an error when copying
the total income from the daily income spreadsheet to the monthly report simply
(not simply at all) because the user wasn’t using excel’s formulas.
Luckily for me, when the first things you choose at random
are erroneous and you can clearly explain an easy solution, you are given
immediate respect and free rein to make the necessary changes - a process that
can take months because in the Nicaraguan culture a solid foundation of trust
must be establish before you can point out more efficient methods for their
businesses. In the first example, I gave the community leader tables with
[Date] [Description of transaction] [Sale] [Purchase] [Total] as headers and
the responsibility to teach her employees how to fill in each line as a
separate transaction. Next, for the hotel, I built them an easy to understand
flowing excel workbook so if he enters in one transaction, he only needs to do
so once and it goes in all the right places.
My perspective of accounting has changed in recent months
from a boring dull field to a wonderfully helpful tool so vital to a business.
Business owners here really love accounting as it is their opportunity to see
how much money their businesses generate and areas they can improve upon. Many
become giddy and excited the first time we are able to price out their products
and truly think it is the coolest thing. Needless to say, these reactions may
have influenced my opinion.
