Teaching Accounting – A Lesson in Simplicity

If you’re a nerd, there are few things more beautiful than a well kept inventory journal. Over the past week, I've visited eleven small stores in my community to follow up on an accounting lecture I gave at the beginning of May. Expecting nothing, I was pleased (and shocked) to find that each was sort of tracking their inventory. Three were already recording every transaction, every day. Most of them credited my lecture as inspiration to start accounting. I felt like kissing them. Seeing the pages of columned numbers was like watching a child’s first bite of ice cream.

For me anyway. As a Community Economic Development volunteer, part of my job is to help small businesses (like little stores run out of the house) learn basic management skills. I’m frequently approached by small business owners who just want to know if they’re making a profit. I realized early on that accounting would be an important topic, but it took several months to convert what I learned in business school into something basic and relevant enough to teach here.

I’ve settled with inventory management and a basic income statement. If stores track their inventory each day, count it once a month and track their purchases (i.e. keep their receipts), they have almost all the information needed to calculate profit. It gets tricky when they extend credit and eat what they sell (which they almost always do). I’ve stopped trying to tell them not to give any credit and started simply encouraging them to track it and set a per person limit. At some point, I intend to present the concept of “separate pockets,” but for now I just urge them to track what they take from the store.

None of this work is difficult – I encourage all to use their calculators to add and subtract – but few do it. This, I must stress, is human and not cultural. Running a business is hard. Tracking your business’s activities takes dedication, no matter how small the business. Sometimes, people just lack the dedication or work ethic. I’ve seen many of these owners with a machete (in the fields) and I can tell you they don’t lack work ethic. But there is frequently a lack of motivation.

Lack of motivation (I’ve found) tends to stem from fear or ignorance or, more commonly, a combination of the two. Countless people have told me they “can’t” do accounting, before even knowing what they must do. Many cite their limited education as an impassable deterrent. Others have received accounting training from government agencies, who feel it is necessary to explain the difference between a Corporation and a Limited Liability Corporation. No one in the Comarca is incorporated and no one has insurance! Get with the f*%$ing program! Sorry. Because of this fear and ignorance, I must reassure store owners that they are capable of accounting – that it isn’t that hard. Then I have to make sure my content really isn’t that hard. For example, I used to encourage owners to raise price above cost according to a profit margin percentage. I have since dropped the percentage and simply told them to make sure price is higher than cost.

This consistent simplifying is probably teaching me a lot about development work in general. I hope so. If nothing else, it’s made me appreciate, more than four years of business school did, how hard it is to successfully manage a business, no matter how small.