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What needs to be taught in school to become a small business owner?

All too often Elizabeth Pitu hears people say that accounting and other subjects at school did little to prepare them for the practicalities of running their own business.

A teacher of accounting for 26 years, Elizabeth has always suspected the subject matter was a little too academic and theoretical. Now, with exposure to small business owners, she’s convinced the school curriculum for accounting in New Zealand (and she suspects other countries too) needs a rethink.

“In my experience accounting at school is not as real or practical as it should be in terms of running a small business,” she says. “Understanding the concept is quite different to doing things like working out what to cost your work at, making sure you get a market price and allowing for the advertising you might need to do. Most business owners end up learning the hard way.”

In the hope of convincing policy makers to consider changes to the way accounting is taught in schools, Elizabeth has embarked on a research project through Waikato University titled ‘Financial Skills for Small Business Owners’.

This involves interviewing small business owners about what financial skills they think would have been useful to learn in school. Here are the most common gaps Elizabeth has identified so far:

  • How to price products/services/concepts
  • Coding bank statements
  • Using accounting technology beyond entry level
  • Better ways to manage debtors
  • How to forecast cashflow
  • Doing a GST/VAT/Sales Tax return
  • Allowing for the vagaries of tax and other deductions when paying wages
  • The need to put money aside to pay taxes

Elizabeth says being able to access technology such as Xero that’s easy to understand and use, has been acknowledged by several research participants as key to their achieving business success.

We’d love to hear what you think would be useful for prospective business owners to learn in school in the comments section below. Or you can let Elizabeth know on her Facebook page.

 

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5 comments

Philippa O’Mara
16 May 2012 #

When I moved to New Zealand from the UK some years ago, I was very surprised to see accounting taught in school. When you think about it, there are many aspects to running a business – marketing, purchasing, production, sales, HR, systems… Yet accounting is given its own dedicated subject at an age when most of the students wouldn’t have a broad enough knowledge of general business to really understand what the terminology means. I have helped several friends’ children to understand accounting better by taking them back to things they understand – working at a pizza outlet – the ovens are the fixed assets, the ingredients are cost of sales etc. Surely students need to understand more about business generally otherwise they risk just rote learning what is a debit/credit. Working with case studies and business games would give students a better opportunity to see where accounting fits into business, its importance in running a business, forecasting/financial planning the future versus recording the past, pricing and costing, understanding the borrowing (and repaying) on the profit and cash flow (principal vs interest), managing cash flow in debtors, creditors and stock turn. Introducing students to financial management rather than just the compliance side of accounting would also improve their ability to run businesses in the future.

Naomi
17 May 2012 #

In my opinion there are many small business owners who, while at school do not know that they are destined to be small business owners. Accounting is normally an elective subject and as such might not reach the future small business owner who is busy studying unrelated subject matter.

Really, how many people finish school and head out and open their first venture right off the bat? Even if school was teaching the fundementals, many small business owners might never have studied accounting while in school.

The best way to ensure that small business owners are educated on accounting would be to make it compulsory for all individuals looking to start a company or a small business as a sole trader to complete an “accounting and tax basics course”.

Just my opinion.

Dawn
17 May 2012 #

Hi I agree with all of the above but the accountants language around debtors and creditors seems archaic. We have just got stuck in Xero trying to use this tool and a glossary of terms for the layman would be useful.

Philip Bridgen
17 May 2012 #

In general I agree with the earlier comments, regarding teaching accounting at school – in my experience as a Chartered Accountant dealing with many SME owner/operators, probably a majority of them had little idea before or when they left school that they would end up where they did! However, I think that some educational coverage of the practical world of business would benefit most pupils. This is gained very effectively by participation in the annual “Young Enterprise” scheme – I have mentored several teams from different colleges, and have always been amazed and impressed by their hard work and enterprise.

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