*Shocking business statistics alert*
Did you know that 67% of businesses end up closing, merging or failing because of poor accounting and financial management?
Running a business is not easy and accounting management is one of the biggest challenges. You have to deal with economic uncertainty, complex financing, and ever-changing regulations. These are some of the common accounting pitfalls that prevent businesses from growing and thriving.
If you want to achieve your growth goals, you need to overcome these and other accounting challenges.
But how can you do that when you have a limited budget and resources? Especially if you are a small business or a start-up. Don’t worry, we have some expert tips to share with you in this blog post.
Accounting Areas Where You Can’t Afford to Compromise
Accounting is a broad and complex subject that covers many aspects. You need to pay attention to each one of them and ensure quality and accuracy. You can’t ignore or neglect any of them.
Here are the accounting areas where you have to be careful and diligent:
– Reporting and analysis: You need to produce accurate and timely reports and analyze your financial data to make informed decisions. For example, you need to monitor your cash flow, profitability, liquidity, and solvency ratios. You also need to use tools like budgeting, forecasting, and variance analysis to plan ahead and control your performance.
– Bookkeeping and record keeping: You need to keep track of all your transactions and update your records regularly to avoid errors and discrepancies. For example, you need to reconcile your bank statements, invoices, receipts, and ledgers. You also need to use software like QuickBooks or Xero to automate your bookkeeping tasks and reduce human errors.
– Data security: You need to protect your financial data from unauthorized access, theft, or loss. You need to use encryption, backup, and firewall technologies. For example, you need to encrypt your data with passwords or biometric authentication. You also need to back up your data on cloud storage or external drives. You also need to install antivirus and firewall software on your devices and networks.
– AI and automation: You need to leverage the power of artificial intelligence and automation to streamline your accounting processes and reduce manual work. For example, you can use AI-powered chatbots or virtual assistants to answer customer queries or provide support. You can also use automation tools like Zapier or IFTTT to connect different apps and services and automate workflows.
– Industry trends: You need to stay updated with the latest trends and best practices in your industry and adapt your accounting methods accordingly. For example, you need to follow the accounting standards and principles that apply to your industry. You also need to keep an eye on the emerging technologies and innovations that can improve your accounting efficiency and effectiveness.
– Overhead costs: You need to minimize your overhead costs and optimize your cash flow. You need to cut unnecessary expenses and increase your revenue. For example, you can outsource some of your accounting functions to a professional service provider or freelancer. You can also use online platforms like Shopify or Etsy to sell your products or services.
– Tax compliance and risks: You need to comply with all the tax laws and regulations in your jurisdiction. You need to file your tax returns on time and avoid penalties and audits. For example, you need to calculate your taxable income, deductions, credits, and liabilities correctly. You also need to hire a tax accountant or consultant to help you with tax planning and filing.
These are the key accounting areas that you need to focus on if you want to run a successful business. By following these tips, you can improve your accounting management and achieve your growth objectives.
Tips to Deal with Accounting Hassles
We admit that accounting hassles can cause huge impediments and hold back a venture. But, it’s also true that nothing is impossible on learns the art and science of fixing these challenges. Learn from the experts directly.
1. Take the help of an accounting system
Technology is great and is making our lives better than ever. Accounting software is a byproduct of technology allowing all sorts of businesses to enhance accounting at multiple fronts. It’s a tool introducing automation at crucial accounting aspects like reporting, analysis, data sharing, collaboration, and many more.
Its implementation will automate multiple mundane yet important tasks while ensuring quality and accuracy. Reports like cash flow, revenue generated, expenses, and many more can be generated over a single click.
If asked by accounting professionals, generating these reports with accurate insights is a huge hassle. The introduction of an accounting system will solve this issue greatly.
2. Outsource accounting assistance
Maintaining an in-house accounting team can be too pocket-heavy for many businesses. The current talent crunch is making the situation worse than ever. Outsourcing accounting professionals is a viable approach to enjoy seamless accounting processing while keeping the expenses involved under control.
Other than keeping yourself free from the tension and expenses involved in hiring and retaining the team, this practice saves money on fronts like offering amenities, employee benefits, and employee training.
3. Hire a bookkeeper
Bookkeeping is an essential part of accounting that involves recording and organizing financial transactions. It may seem like a simple task, but it requires attention to detail and accuracy. A bookkeeper can help you keep track of your income and expenses, prepare financial statements, reconcile bank accounts, and ensure compliance with tax laws.
Hiring a bookkeeper can save you time and hassle, as well as prevent errors and fraud. A bookkeeper can also provide you with valuable insights into your business performance and financial health.
4. Use cloud-based solutions
Cloud-based solutions are becoming more popular among businesses of all sizes and industries. They offer many benefits over traditional accounting methods, such as accessibility, security, scalability, and integration. Cloud-based solutions allow you to access your accounting data from anywhere, anytime, using any device. They also protect your data from loss or theft by storing it on secure servers. Cloud-based solutions can also grow with your business needs and connect with other applications seamlessly.
Using cloud-based solutions can help you streamline your accounting processes and improve your efficiency and productivity.
5. Separate personal and business finances
One of the most common accounting hassles that many entrepreneurs face is mixing their personal and business finances. This can lead to confusion, errors, and legal issues. It can also make it difficult to track your business performance and profitability.
To avoid this hassle, you should separate your personal and business finances as soon as possible. You should open a separate bank account and credit card for your business transactions. You should also keep separate records and receipts for your personal and business expenses. This will help you simplify your accounting tasks and comply with tax regulations.
6. Plan ahead for taxes
Taxes are inevitable for any business owner. They can also be a source of stress and hassle if you don’t plan ahead for them. You should be aware of your tax obligations and deadlines, as well as the deductions and credits that you can claim. You should also keep accurate records of your income and expenses throughout the year to make tax filing easier.
Planning ahead for taxes can help you avoid penalties, audits, and cash flow problems. It can also help you optimize your tax savings and reduce your tax liability.
7. Create a budget
A budget is a plan that outlines your expected income and expenses for a given period of time. It helps you allocate your resources wisely and achieve your financial goals. A budget can also help you monitor your cash flow and identify areas where you can save or invest more.
Creating a budget can help you avoid overspending, underestimating, or missing out on opportunities. It can also help you prepare for unexpected events or emergencies that may affect your finances.
8. Review your financial statements regularly
Financial statements are documents that summarize your business’s financial activities and position. They include the income statement, the balance sheet, the cash flow statement, and the statement of changes in equity. They provide you with important information about your business’s profitability, liquidity, solvency, and performance.
Reviewing your financial statements regularly can help you evaluate your business’s strengths and weaknesses, as well as identify trends and opportunities. It can also help you make informed decisions and plan for the future.
9. Keep up with accounting trends and best practices
Accounting is a dynamic and evolving field that is influenced by various factors, such as technology, regulations, standards, and customer expectations. To stay ahead of the competition and meet the demands of the market, you should keep up with the latest accounting trends and best practices. You should also update your skills and knowledge by attending seminars, workshops, webinars, or online courses.
Keeping up with accounting trends and best practices can help you improve your accounting processes and systems, as well as enhance your service quality and customer satisfaction.
10. Consult an accountant
An accountant is a professional who can help you with various accounting tasks, such as preparing financial statements, filing taxes, auditing, advising, and consulting. An accountant can also help you with strategic planning, business valuation, risk management, and compliance.
Consulting an accountant can help you save time and money, as well as avoid mistakes and problems. An accountant can also provide you with expert guidance and support to grow your business and achieve your goals.
11. Make the most of cloud computing
Cloud computing is not just a buzzword, but a powerful tool that can transform your accounting practice. By moving your accounting software and data to the cloud, you can enjoy many advantages that traditional methods cannot offer. Here are some of them:
– Lower costs: Cloud computing eliminates the need for expensive hardware, software licenses, and IT maintenance. You only pay for what you use, and you can scale up or down as your business needs change.
– Data security: Cloud computing providers use advanced encryption and security measures to protect your data from unauthorized access, loss, or damage. You can also set up permissions and access levels for different users and devices.
– Anytime, anywhere access: Cloud computing allows you to access your accounting data and software from any device with an internet connection. You can work from home, office, or on the go, and collaborate with your team and clients in real time.
– Automatic updates: Cloud computing ensures that your accounting software and data are always up to date with the latest features, regulations, and standards. You don’t have to worry about installing patches or upgrades manually.
12. Automate the bank reconciliation
Bank reconciliation is one of the most tedious and time-consuming tasks for accounting professionals. It involves matching the transactions recorded in your accounting system with those in your bank statements and identifying any discrepancies or errors. This process can take hours or even days, depending on the volume and complexity of the transactions.
Automating the bank reconciliation process can save you a lot of time and hassle. It can also improve the accuracy and reliability of your financial reports. By using a software tool that integrates with your accounting system and your bank account, you can:
– Import and export data quickly and easily
– Match transactions automatically using predefined rules and criteria
– Flag any unmatched or suspicious transactions for further investigation
– Generate reports and summaries of the reconciliation status and results
13. Build a central information exchange system
One of the biggest challenges for accounts handling is to ensure effective and timely communication with other departments in an organization. For example, the accounting department needs to access the salary data from the HR department, and the marketing expenses from the marketing department.
This can be a tedious and error-prone process if done manually or through multiple platforms. That’s why it’s essential to have a central information exchange system that can integrate all the relevant data sources and provide a unified view of the accounting information.
Good accounting software can help you achieve this goal by offering seamless integration with other systems such as CRM, HR, Payroll, etc. This way, you can easily retrieve and analyze the data you need without wasting time or compromising accuracy.
14. Adopt robust cybersecurity practices
While cloud computing and online accounting offer many benefits such as convenience, scalability and cost-effectiveness, they also come with some risks such as data breaches, cyberattacks and unauthorized access. Therefore, it’s crucial to adopt robust cybersecurity practices to protect your accounting data and systems from any potential threats.
Some of the best practices include keeping your software and devices updated with the latest security patches, using antivirus software and firewall protection, enabling two-factor authentication (2FA) and single sign-on (SSO) features, limiting data access to authorized users only, and conducting regular data audits and backups.
15. Set up a reminder system for tax filing
Another common challenge for accounts handling is to keep track of the tax filing deadlines and avoid any penalties or fines. Missing a tax filing date can have serious consequences such as increased tax liability, interest charges and legal actions.
To avoid this hassle, it’s advisable to set up a reminder system for tax filing that can alert you well in advance of the due dates for GST, income tax and any other applicable taxes for your business. You can use a calendar app, accounting software or dedicated tax software to create and manage your tax reminders.
16. Embrace new technology in accounting
Technology is constantly evolving and you need to keep up with it to enhance your productivity. For example, one of the latest trends in accounting is the use of AI and cryptocurrency. About 2% of accounting firms have already adopted AI to improve their budgeting, forecasting, and data analysis capabilities.
9. Forecast accounting outcomes in real time
By forecasting your accounting outcomes, you can have a better understanding of what to expect in the future. This will help you plan ahead and take action to improve your banking compliance and finance processing.
17. Hire accountants with diverse skills
Instead of hiring basic accountants, look for professionals who have different areas of expertise. For example, hire professionals who are proficient in GST, payroll, standard accounting, and so on. Having a diverse team of accountants will ensure accuracy and excellence in all aspects.
Point to Ponder
Accounting challenges are inevitable, but they can be overcome with the right strategies and solutions. However, there is no one-size-fits-all approach to accounting. Each business has its own unique accounting ecosystem and needs to tailor its solutions accordingly. Therefore, before you implement any of the tips we have shared in this post, you need to understand your accounting problems and goals. If you need professional guidance, you can always consult with accounting experts who can help you design and execute effective solutions.
Over to You Now
Accounting is a crucial aspect of running a successful business. It helps you track your finances, comply with regulations, and make informed decisions. However, accounting can also be complex and time-consuming, especially if you don’t have the right tools and systems in place. That’s why we recommend using automation and AI to streamline your accounting processes and eliminate human errors. You can also outsource your accounting tasks to reliable and experienced service providers who can handle them efficiently and affordably. Moreover, you can leverage cloud-based platforms like Your KeepMyAccount to access your accounting data anytime, anywhere, and from any device. By following these tips, you can improve your accounting performance and grow your business.