I suspect that there may be a larger social force at work here in the story about multi-billion firm FTX having no normal functional bookkeeping system. Yet it come as a surprise to them when taxes, penalties and even worse outcomes follow.
More often lately I notice that today’s business owners and managers sees little value in keeping records and certainly less in reporting information to the government. Their priority is accomplishing their own goals, not in meeting some business standards that are set by a third party that are not their own. Minimal accounting is the new standard. Many do not even bother to connect their money flow to any kind of reconciled ledger. These owners often say that they do not see value in the ‘old ways’ of running their modern business.
This year I’ve disengaged from more than 10 small business clients – mostly nonprofits but also a few for profit corporations – because they had the same issues with lack of regard for basic accounting as multi-billion FTX discussed here. When I say ‘this is what you are expected to do’, they either do not care or respond that it’s just not worth it for them to do so.
While seldom does this casual attitude result in criminal neglect, it does often result in fraud (of some type or another) and frequent government penalties. Then the owners express shock and annoyance that this happened, even when it was a predictable almost certain outcome from my perspective.
Setting up an effective business record keeping system is not difficult. It does require significant dollars and manpower that needs to be planned, budgeted, and committed. It’s either accepted as a cost of doing business or must be accepted later as an eventual cost of fraud and/or prosecution.