Accounting Pain Points To Avoid
Surprisingly, even accounting firms that are supposed to be the experts in their field, can be inefficient when it comes to their own accounting practices. Finding a solution to these problems begins by identifying and acknowledging the pain points in accounting practices.
Accounting principles are the primary assumptions, rules of operation, and essential characteristics that make up the groundwork for the development of accounting financial statements. And the resulting financial statements are the written records that represent the financial activities and health of an enterprise.
Accountants’ responsibilities are great and include the collection, accuracy, recording, analysis, and presentation of a company’s financial operations. With so many tasks on their plate, it is easy to slip into bad habits, intentional or not.
More problematic is that there are businesses that began with below-standard accounting practices. They may not realize the full extent of falling into such bad practices since they have been using them for years.
Accounting principles – avoid them at your own risk
It starts with the basics. Accounting principles are unquestionably vital when developing financial statements. Accounting principles are like the glue that holds the whole accounting process together. These statements have an overall objective, which is to give the user of the statements an effective tool for making business decisions.
To be useful, the accounting report must have specific characteristics, like being dependable and efficient. The information must be neutral, accurate, and verifiable. To be efficient, the information must be predictable, prepared in a timely fashion, and be easy to use.
Other attributes are that the accounting information must be coherent, comparable, provide a utilitarian need such as cost/benefit, and make a material difference.
Being familiar with the accounting principles is a business must, otherwise, you run the risk of endangering your career, just as we have seen in recent U.S. corporate accounting scandals.
Being too human; subjective and reactive
It is human nature to want to please people, whether they be company executives, clients, or investors. And it can be tempting to fall into reactionary habits. Downplaying bad news is human nature. Be systematic and avoid being too instinctive. Conducting independent monthly or quarterly reviews to reconcile data is a solid best-practice.
Grappling with team communications
It can be quite frustrating when team members are kept in the dark when it comes to the latest financial developments. Managers do find it hard to communicate with their teams when things get busy. Consistent systems of dissemination of accounting information are key to streamlined communication. Always take time to meet with your team members, or better yet, send them emails to give them updates.
The main point is, always keep communication flowing.
Lack of automation
Old accounting tools like Excel are still useful but lack the modern automation that other programs can provide. Manually inputting data is a waste of time and puts your team at risk for human errors, and can lead to missed deadlines and inaccurate insights. Worse, it could result in inaccurate decision-making.
Growing companies need to take advantage of their expanding amounts of data. But, using this data can prove challenging when accounting tools are not advanced enough.
Accounting teams need to invest in more sophisticated tools to manage data-intensive workflows, such as reporting and consolidation.
Not investing enough in cybersecurity and compliance management
In today’s digital economy, hackers continue to prey on businesses, especially the small ones who lack the resources to invest in complex cybersecurity systems. Cybersecurity is vital to the survival of all businesses. It would be a big mistake not to secure your network.
Small businesses that do not have the means to fund an in-house IT team can always hire managed IT service companies. These MSPs offer cost-efficient IT services that fit any budget.
MSPs also can help with compliance management to help you keep up with the ever-changing technologies.
Small business pain points – outsourced accounting can help
Small businesses often have specific pain points that are challenging and costly to handle internally. The resources of outsourced accounting firms exist expressly for this purpose.
1. Taxes and regulations
Business owners dread the tax season because it can be such a painful experience, especially if they have trouble maintaining their bookkeeping systems. Most entrepreneurs are also not that familiar with tax regulations, which could inadvertently put them on the wrong side of the law.
The expertise of a dedicated outsourced accountant can help with this burden. An outside opinion can help avoid penalties and costly mistakes and may well be worth the peace of mind.
2. Losing sight of cash flows
Business owners and managers juggle a myriad of tasks. They get caught up in the daily operations of their business and can forget about their financial health.
An objective external accountant can provide invaluable cash flow reports. This helps paint a clear picture of where the business stands. It also allows much more informed decisions to achieve long-term business goals.
3. Not knowing how the business stacks up to competitors
Part of an effective business strategy is knowing how the business compares to its competitors. One point of comparison is in the financial performance of the company. An accountant who specializes in your industry will have a broad spectrum of knowledge and can help by generating reports that will show how the business measures against its competitors.
Conclusion
Poor financial management is one of the main reasons for small business failure. It is especially true in the first year of the business. Accounting plays an essential role in preparing information that helps organizations in their growth and development.
By identifying and addressing these accounting pain points, you can help ensure that your company has the business framework it requires for long-term success.