ROBUST financial management is a must for any business and this article will explore the essential business function of accounting and focus in on 4 reasons why your business needs it.
HINT: Pay particular attention to number 4. We’ve included a list of things we do differently in relation to this at Ingredior – don’t miss it.
Let’s get one misconception off the table first – accounting and bookkeeping are not the same thing.
While bookkeeping records the financial transactions of the business, accounting goes well beyond this scope – not only allowing for better management of cash flow within the business but facilitating its entire financial operations and strategic planning.
In a business, particularly in their first few years of running, it is crucial to be as productive as possible. One of the ways this is achieved is through a dependable accounting process that addresses all processes efficiently.
Here’s why your business needs accounting activity, even if you feel like you’re surviving fine with bookkeeping alone.
A good accountant will ensure your business never falls foul of the law.
Businesses get audited every single day and depending on the industry in which you operate, staying compliant as a business may require adherence to a raft of regulations and rules.
It’s no secret the paperwork for tax reporting in itself is complex and tedious, but add payroll, profit and loss statements and any other statutory requirements pertaining to your industry and you have a boat load of paperwork to do that will take you away from your core business activities.
A professional accountant is not only well-versed in tax laws and procedures, but they can take care of compliance-related reporting and industry-specific regulations also. These processes not only ensure your business remains compliant, but can help it to avoid common pitfalls that could slow down or even shut down its activities.
This is the big kahuna benefit of accounting right here. Research shows more than 80% of businesses fail due to cash flow issues and this is why having a professional accountant to take care of your cash flow management is imperative.
A good accountant will save you money in a variety of ways. To start with, accurate record keeping will show you exactly where your money is going, which allows you to hone in on where you need to cut costs, and what trends are evident to help you yield greater returns.
This type of insight is brilliant for avoiding costly mistakes and saves you time in preparing documents and reporting your financial specifics.
Hot tip: Engaging a professional accounting firm lets you gain the expertise of this industry professional for the betterment of your business without forking out a full-time wage.
When your accounting is handled correctly you come out with a clearer picture of your company’s financial health and this allows you to make informed decisions to support your business as it scales up.
A credible accountant will help you to understand your cash flow, which will unlock trends in seasonality and feasibility when the times comes to make critical decisions.
Don’t forget the advisory services and business intelligence that comes with even the most basic professional accounting packages too. If you want to better understand your businesses performance with an eye to making strategically-sound decisions, the first place to start is by picking the brain of your accountant, after all, they have the best overview of your business – warts and all.
The first 3 points contribute to a more efficient business and most companies begin to notice the benefits of professional accounting right away. So how do you ensure the accounting itself is efficient?
With finance and accounts roles required to engage and perform a broader function and support across the business more so than ever before, implementing efficiencies can make the difference between a successful team and a ‘burnt-out’ team, this includes you as well.
Efficiencies are our happy place and if we can help you find your happy place, we’ll be there to assist where ever we can!
A good place to start, however, is outlined in the next section.
- Utilising modern technology:
The current accounting software available to the small to medium sized businesses offers many different functions purely designed for efficiency and convenience. These include cloud-based systems, automation in bank reconciliations and integration with external software. However, for a typical operator with little training, it can be an overwhelming experience to setup such software functionalities. Calculating the value added by either seeking training or outsourcing the process can have the potential to eliminate lots of excessive ongoing work that is involved in the manual practice.
- Batch Processing:
Batch processing is the processing of data on a delayed basis. When a given task can be processed later at a decreased cost and does not reduce the value added of the completeness of that task, it is reasonable to delay such task. For example, in accounts payables, it can be more efficient to group transactions and process them at once in a specified, efficient procedure rather than entering them in real-time, as steps would have to be unnecessarily repeated.
Deadlines are commonly used in businesses to create urgency for work to be completed. This is all the more useful in the accounting department, as most processes rely heavily on the completeness of prior tasks. Creating strict deadlines and enforcing them is a key requirement for efficiency in financial management.
- Process walkthrough
For processes of all complexities, regular walkthroughs of the steps taken to complete the process will provide great benefits. This is achieved by analysing each step to determine if it is required to achieve the overall goal, or if it is the most efficient way to do so can save time spent on unnecessary work.
- Staff training
With the employees supporting the operation of the business, the efficiency of the business is then limited to the skills of these employees. Despite the experience gained from on-the-job learning, ensuring the latest accounting practices and technologies are regularly put in training can provide an efficient and competitive workforce. This can be achieved by incorporating the many different types of learning options such as courses, seminars or online tutorials, all which will improve productivity.
Here at Ingredior, our unique approach harnesses the four pillars of business success to open up opportunities for your business growth. Namely:
- Strategic Finance
- Strategic Marketing
- Strategic Business Development and
- Business Strategy
You can learn more from our capability statement.
If you’d like to have a chat to us about how efficient accounting could be productive for your business, contact us for a FREE obligation-free consultation today.
- Efficient accounting is more than just bookkeeping, in fact, it’s excellent bookkeeping underscored by the type of financial intelligence you could only dream of;
- A good accountant will help drive your strategic agenda in business;
- You don’t need an in-house finance department – outsourcing this function makes good sense in a variety of ways;
Test this theory:
- For one month, track the amount of time you spend on your finances?
Then times it by your hourly rate.
Write down what would be earning for the business if you spent those hours working in the business?
Can you afford to be losing that amount of time and money each month?
- How enmeshed is your finance department with the areas that deliver your core business objectives? Ask yourself this. If these two functions operate in separate silos, you might have a problem;
- Seek obligation free advice about upping your accounting game. Has your business ever considered how Strategic Finance could change the game plan for your company, and its staff?