Written by Tim Sernett, Accounting & Finance Advisor for SMBs | Owner-Virtual BeanCounters Inc | Entrepreneurship enthusiast | Dad | Sports nut
Uber has been in the news a lot recently…for all the wrong reasons. For one of those reasons the headlines blared “Uber owes its drivers millions due to accounting mistake!”
I’ll be the first to admit that rarely does accounting make the headlines, and when it does, it’s usually not good.
The gist of the story is that Uber was taking its fee before deducting other fees and taxes, which was subsequently costing their drivers on every single trip.
So if a company as big and successful as Uber is susceptible to accounting mistakes, what about you and your small business? If a company as big and as successful as Uber is susceptible to weak accounting processes, what about you and your small business?
Typically I’m writing about how business owners need sound bookkeeping and financial reporting processes so they can be better, more professional business operators.
Or how business owners should spend time or resources on better understanding the financial results so they can drive their companies forward towards a healthier financial future. But this Uber story has me thinking about how poor accounting processes can hurt a business’s image, and more importantly, damage key relationships.
Relationship with team members
I think the biggest cost to Uber in this story will be how it’s impacted their trust with their key team members…the drivers. Uber has lots of problems these days, but further damaging their relationship with their contract drivers is a big deal. In the wake of the damaged trust due to an “accounting mistake”, how many Uber drivers have either switched to or are looking hard at Lyft?
Are your employees being paid on time? Do your team members clearly understand their compensation packages and is it easy for them to follow the details of each paycheck?
Bottom line…you can build trust and loyalty with your team members with sound bookkeeping processes that gives them the confidence they will be compensated on time and accurately.
Relationship with customers
Your customer relationships can also be negatively impacted with sloppy bookkeeping practices. A big part of the customer experience in predicated on how well your business communicates with them exactly what they’re paying for…and when they need to pay.
For a retail business this is pretty easy. Clearly marked pricing and a good point-of-sale system solves the process. For all other businesses this falls on the invoicing process.
Your customers want to know exactly what they’re paying for, they want to be invoiced in a timely manner, and they want to know exactly what the payment terms are.
Are you invoices sent out on time according to the contract? Is it clear what your payment terms are? Do your invoices clearly detail what work was done or what part of the contract is completed?
If your invoicing processes are broken it absolutely hurts your customer’s experience and puts a strain on the relationship.
Relationship with vendors
Strong processes around paying your bills also keeps your company on good terms with your key vendors. Think about your key vendors and the importance they play in the operations of your business. How well you take care of paying their bills can make all the difference in how well they support you.
Go ahead and be tough when it comes to negotiating terms with your key vendors, but once negotiated, respect the terms. Your business is at risk if you have accounting mistakes or oversight that put you in a tenuous position (whether you know it or not) with your key vendors.
The lesson is clear and one all businesses need to learn: Sound bookkeeping and accounting processes are essential for small business owners to successfully drive their companies forward and establish/maintain great relationships with your team, your customers, and your key vendors.