Today’s new-age entrepreneurs have plenty of responsibilities on their shoulders. First, they must keep up with emerging market trends and industry dynamics to gain an edge over competitors. Likewise, they must optimize campaigns and implement the right strategies to spread the word about their business. Above all, business owners have to stay on top of all money-related matters.
From payroll, and inventory, to expense management – managing business finances is no cakewalk. Besides hiring a few bookkeepers, you bring a few accounting and finance experts on board. They can assist with financial statements, invoice management, and profitability analysis. In addition, experts can track cash inflows and outflows, giving you a clear picture of money movement in the organization.
Once you have recruited a team, focus on improving your company’s accounting processes. For example, if you maintain all records manually, automate the operations for better efficiency. Likewise, create seamless payroll and reporting systems that provide an in-depth profitability analysis. If you are an aspiring entrepreneur looking to learn the ropes, here are six ways to improve your business’s accounting.
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Ensure Compliance with Reporting Standards
Whether working as a sole proprietor or building a limited liability company, every business must adhere to accounting standards. In addition, Generally Accepted Accounting Principles (GAAP) apply to every company indulging in buying and selling activities. So, is your business complying with these protocols? Depending on your business model, you can look into the standards that cater to your business.
Let’s say you are an outsourcing company that offers other companies subscription-based information technology arrangements (SBITA). In this scenario, GASB 96 applies to your business. It provides guidance on accounting and financial reporting practices for SBITAs. Therefore, look for the application to your business model and ensure your company is compliant.
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Streamline Tax Management
Is there a tax management system in place? Unfortunately, most companies wait until the last minute to calculate taxes and file returns. It opens them to inaccuracies and hefty penalties if any calculation goes wrong during the audit. Thus, a significant part of improving business accounting involves streamlining tax management. For this, you can hire a tax accountant and automate the entire process through tax management software.
It provides organizations with centralized tax configuration and reporting. You can incorporate the software with different accounting modules to collect tax information from every financial document. Once the software gets integrated, it can also classify tax deductibles, allowing you to reduce taxable income. In addition, you can add a tax vendor account to specify the frequency of tax and assign a vendor tax quote. That way, you can offset liability with the vendor’s tax obligations.
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Create a Seamless Payroll System
Unless you are a one-person army, a team of employees will work for your business. That means payroll is an essential part of your business. Truthfully, payroll seems straightforward on the surface to every entrepreneur; however, it is much more complicated and tricky.
All companies have two options when it comes to payroll. First, payroll software can automate all disburse salaries by clicking on the screen. Otherwise, you can handle it in-house by hiring bookkeepers for this job. They will calculate each employee’s withholdings, taxes, provident funds, and gratuity. At the same time, they will make direct deposits to employees’ bank accounts. Even though the process is labor-intensive, it has room for adjustments that might not be possible through automation.
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Automate Financial Reporting
Financial reporting is an extensive accounting task. First, accountants must prepare general entries and t-accounts and add the values in a trial ledger. Then, using that data, they create income statements, balance sheets, cash flow, comprehensive income statements, etc. The entire process is extremely time-consuming, with a high chance of human error. So why not opt for automation?
Today’s high-tech accounting software solutions can take over financial reporting responsibility. Accountants must only make general entries on the software, automatically creating all financial statements. Do you know the best part? Such tools are available free of cost. You can download QuickBooks or Sage and begin automating your financial reporting process.
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Focus on Invoice Management
Believe it or not, keeping track of business expenses is no easy task. Hundreds of daily transactions lead to outflows and inflows and are challenging to track. Fortunately, technology is making lives easier. Now, you can integrate a system that will keep all your accounting records organized. But for that, you must choose the right invoice management software, as there are many options in the market.
First, determine your business needs. To scale growth, you can opt for something with all the features and integrations your accounting department needs. It may include expense monitoring, monthly reports, and end-to-end integration with bank accounts. An invoice management system will give a clear picture of business outflows. Hence, you can devise strategies to reduce expenditure and increase profitability.
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Focus on Increasing Gross Margins
One of the most ignored aspects of accounting in small businesses is the cost of goods sold (COGS). It doesn’t matter if you operate in the service or manufacturing industry; this cost applies to every business. And when it comes to improving business accounting, business owners should always be working on lowering COGS. It will strengthen the gross margins while improving business profitability.
Remember, COGS don’t account for business expenses; instead, it includes the cost of your raw materials and inventory. For inventory valuation, you can deploy inventory management software. It will ensure opening stock levels are minimal, increasing profitability. Likewise, you must streamline vendor management to identify suppliers offering goods at the lowest possible prices.
Conclusion
The accounting and finance industry is experiencing rapid change. Many competent and new technological tools have emerged, enabling accountants to automate tasks. From financial statements to inventory management – software can perform all functions in a few clicks. Therefore, businesses should take advantage of these tech evolutions and upscale their accounting process flows. Remember to move step by step so your team doesn’t hesitate to embrace change.
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