Even though you aren’t a professional accountant, you’re still responsible for keeping your business’s books in order. And if you’re the one handling your small business books, you need to follow ethics in accounting.
Read on to learn about the importance of ethics in accounting and consequences your business may be subject to if you use unethical accounting practices.
Why is ethics important in accounting? 5 Reasons
Accountants are expected to act ethically when they handle clients’ books. They must:
- Demonstrate integrity
- Keep things confidential
- Stay up-to-date with the latest accounting news
- Act professionally
Ethics are important in many aspects of business, especially when it comes to your company’s accounting books. Even though you might not be an accountant, you’re expected to exhibit the same qualities as them when you handle your books.
Don’t believe that accounting ethics are important? Here are five reasons why you should keep things legal and follow business ethics in accounting.
1. You’re dealing with sensitive information
As a business owner, you deal with sensitive information on the daily. When it comes to your business books, you need to handle your business bank account information, transaction totals, and other financial data.
In addition to recording your business’s finances, you might also be responsible for handling sensitive employee data (e.g., SSNs and bank information).
If you’re handling your business’s books and dealing with sensitive company or employee information, keep that information confidential and secure.
To keep your accounting information secure, don’t email any sensitive data, make sure your WiFi is secure, have firewalls and other security precautions in place, and be aware of phishing scams. And, don’t go around sharing sensitive information.
Use your head when you deal with sensitive employee and business information. Follow best practices to ensure you’re as ethical as possible when you’re managing confidential accounting information.
2. Your mistakes are on you
Think about this: if you’re caught being unethical in accounting, who will be to blame? That’s right … you.
When you make accounting mistakes or act unethically because you’re not competent in accounting, it’s on you.
If you don’t keep up with accounting ethics and stay up-to-date with accounting rules, you’re bound to make a blunder at some point or another.
Sure, everyone makes mistakes. However, it’s one thing to make an error accidentally, and another to get lazy and fail to keep up with accounting regulations and standards.
To avoid consequences down the road, keep up with the latest accounting news, use your best judgment, and don’t overestimate your skills.
If you find yourself making mistakes time and time again and brushing off accounting ethics, it may be time to seek help from a professional (e.g., accountant).
3. You’re seen as a professional
Although you’re not an accountant, you’re still seen as a professional and expected to act like one when you’re running a business and handling your books.
Part of being ethical in accounting is following certain accounting rules and laws, such as the GAAP (generally accepted accounting principles) set by the Financial Accounting Standards Board. However, keep in mind that not all businesses are legally required to follow GAAP.
So if you want to be seen as a professional, you have to be professional. Follow accounting regulations to avoid any penalties or negative outcomes just like any other accounting professional would.
If you have questions or aren’t sure about how to record a transaction in your books, don’t be afraid to consult someone to ensure you’re complying with accounting rules.
4. You’re at less risk for legal trouble
When you’re not compliant with accounting rules, you’re bound to get into some legal trouble. It may start off with a few unethical accounting practices here or there, but it can ripple into major problems.
If you don’t follow accounting ethics, you’re asking yourself for trouble. To avoid any legal problems in the future, familiarize yourself with ethics and accounting. And, understand what kind of unethical accounting practices put your small business at risk.
5. Your business is counting on you
As you can tell by now, there are numerous reasons why ethics are essential in accounting. However, the most important reason of all is this: your business is counting on you to be ethical.
Just like how your customers and employees expect you to be ethical in your day-to-day business operations, your business depends on it, too.
If you adopt unethical accounting practices, it will likely come back to bite you later. Not to mention, if you get too comfortable following unethical accounting practices, your business could suffer the consequences (discussed next).
Consequences of poor ethics in accounting
Some unethical accounting practices might seem like a good idea, but sooner or later your business will suffer from the negative consequences.
If you act unethically or don’t practice good accounting ethics, your business could:
- Lose customers
- Have trouble retaining employees
- Struggle to stay afloat
- Lose other business relationships (e.g., investors)
- Have serious legal repercussions
In addition to the above consequences, investors, customers, and employees might lose faith in your business and brand if you’re unethical in accounting. Plus, being unethical in accounting could spell doom for your startup and cause you to close up shop for good.
The moral of the story is this: regardless of whether you’re an accounting professional (aka CPA) or a bookkeeper for your own business, you need to follow ethics in accounting.
Searching for an easy way to keep your business transactions up-to-date and remain compliant with accounting standards? Patriot’s accounting software lets you streamline the way you record your income and expenses. Try it for free today!
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This is not intended as legal advice; for more information, please click here.