3 Steps to Efficient Bookkeeping
Many people have a vivid picture of an accountant or bookkeeper in their minds. It is an old, grumpy and constantly nagging person that adds and subtracts all day long. He or she is excellent with numbers and papers. However, this stereotype is heavily influenced by media and movies. In reality, bookkeepers have intense and essential duties to carry out. The well-being and financial success of the company rely on their work. It is far more than merely paying salaries from the bank account or handing down invoices to the boss-man or boss-lady for a signature. So it might get confusing as to what could be considered an efficient bookkeeping service? We are here to help find that out!
You love to hate it
In the minds of business owners and/or project managers, accounting tasks are very mundane and full of bureaucracy. No creativity, idea generation, or magical brainstorming here. Just dots, digits, commas and the very essence of business – money. That is, for the most part – true. Accountants have to be very patient, dependable and transparent. Far from everyone could cope with this sort of work, let alone be efficient in it. This is why they are an expensive asset to maintain keep on the payroll.
If you are a shareholder, a CEO or the owner, your accountant is almost like your right hand. If they do their job well, the company is bound to minimal losses and maximum profits. However, hence their failure, you can end up with fines or worse – gone bust.
We could give you a rundown of the IFRS (International Financial Report Standards), US GAAP, JMIS, etc., but that would take long, be mundane and boring. Let’s leave that to the accountants, and for now, we will focus on what an efficient accountant should be responsible for and what value he or she could bring to your business.
In no way is this a simple job, but many businesses do not have the financial resources to employ in-house accountants. The current microclimate in the world of business is steadily shifting towards outsourced accounting. Nevertheless, you must hire or find an accountant because if your numbers don’t add up, trouble will come in bunches and it will come quick.
So, the natural choice would be to search for the most cost-efficient solution, right? But how to employ a competent and knowledgeable bookkeeper without going out of pocket? Here are our three steps for efficient bookkeeping to help.
1 Step: Setting it up
In order to begin, you have to set up the bookkeeping system. If you are looking at long-term stability, you have to ensure long-term accounting possibilities. Buy licensed software, employ people, or sign a contract with an agency. This way, you will not be left stranded without any sufficient help.
If a recently employed accountant has no software or system to work with, they will only consume resources and will not contribute to the company.
Choosing the right system/software
For beginners or small businesses, you could try and meddle with Excel or Google Sheets. However, this data is very sensitive and vital, thus managing it with Excel, if you plan on growing and expanding, will become tedious and colossally tricky in the future. It would be best if you had the proper software, dedicated to business accounting.
There are free software units, but to accurately track transactions, monitor monthly or quarterly expenses and to this sort of stuff, you have to find a pay-to-use software. Free options usually limit the possibilities for the accountant and have fewer nuances that help make the most of accounting.
You need to try a demo or hire an accountant that is knowledgeable about a particular platform. Alternatively, you could delegate this task to a firm that has its own tools and an established system.
Automation of time-consuming tasks
The most worrying and consuming resource with regards to accounting is, of course, money. But time spent doing tedious things is also essential. An accountant only has to do so much work as a lot of it can be automated. For example – salary payments, a seemingly endless stream of invoices and tons of other tasks could be scheduled and completed by computers instead of making an accountant complete them by hand.
Of course, if you make less than fifty transactions per month, this is not going to save a lot, but if your business handles more, trust us – automation should be high on your priority list.
2 Step: Managing finances
For the head of the business, nothing is more important than finances. If the money keeps flowing into your company, and it is appropriately managed – you will be profitable. However, if financial management is poor, your idea, no matter how revolutionary or exceptional, could crumble right before you. Financial management engulfs all of the money movements within your company. All expenditures and incomes are and should be monitored with the utmost precision. This is what you should demand from your accountant.
It is the basis and the foundation for all other elements in financial management. A bookkeeper knows your monthly expenditures, incomes and should report all oddities or strange details. From setting up documents, all the way to finding that 3-year-old invoice for the coffee supply in a corporate party, your bookkeeper should know everything and anything about money movements within your organization walls.
Since excessive or unpaid debt could lead to severe setbacks, foreclosure, or even bankruptcy, it is an essential part of efficient financial management. If the tasks are not automated, also the most talented, diligent and precise bookkeepers could miss a few payments. Then it is an automatic dent in your relationship with the creditor or supplier.
It is best to pay suppliers and creditors first because your business relies on their goodwill and satisfaction.
Accounts receivable (mostly invoices) are the other end of the spectrum. It is the single largest source of income for 99.9% of businesses worldwide. If your organizational choices and accounting are sluggish in tracking who paid and who did not, you might end up with a loss or a negative balance at the end of the month, quarter, year.
Managing this end is vital for your financial well-being. If you make multiple deals, transactions, or sign contracts with other parties and clients, managing accounts receivable needs to be somewhat automated. Even a single neglected or forgotten source of income could potentially haunt you in the future.
The largest heap of trouble for all businesses. Deductions, exceptions, nuances, legal complexities and accounting tricks all come into play. For an average Joe, the tax system is the single biggest Terra Incognita in the business world. Different markets have different rules and tax systems, but your accountant has to know them inside and out. Since the proper interpretation of tax laws and write-offs, done right, could boost your profitability and/or minimize losses.
Besides, tax reports done wrong are a threat as well. This part is arguably the most significant responsibility in the work of an accountant. Larger companies have long and intense tax sessions where both the legal department, accountants and financial analysts devise the best plan for taxation and prepare a thorough report to the tax inspectors/revenue service, etc.
Bank/credit card transactions and reconciliation
We mentioned numerous essential aspects of accounting. This one (Transaction management and reconciliation) sometimes gets overlooked due to the substantial burden that taxation and account management brings in. Bank and credit card transactions also fall under the responsibilities of an accountant. He or she has to make sure that everything is legit and payments or uses of business credit cards are authorized and that employees do not misuse or abuse the resources of the company. By allowing the accountant to overlook and manage bank transactions, you also enable them to handle accounts payable and receivable, so this can be a ‘Two birds with one stone’ type of situation.
In terms of reconciliation, bad things could happen if it is not done right. This is a more considerable risk for smaller businesses, but larger companies could also be harmed if the balances don’t match. Amongst the possible dangers are accounting flaws that lead to an imbalanced budget, inaccurate tax reports, overdrafts, and various other types of unnecessary setbacks.
3 Step: Financial reports and analysis
Very self-explanatory. An accountant or a bookkeeper collects all of the economic data accumulated over a certain period, and then he or she ‘builds’ the income statement. For shareholders, it is an essential piece of data, showing whether the company is on the right track or that changes have to be made. These documents and adequate preparation of such papers are strongly interlinked with the security and profitability of the business.
The statement has to be handed to specific institutions. For example, in the United States, your income statement travels to the Securities and Exchange Commission, and in other countries, there are different bodies for this.
Yearly and quarterly reports
A report will allow shareholders, the CEO, to analyze all of the activities in the preceding period. Most businesses tend to do quarterly and yearly reports to keep a hands-on approach for longer. Over 12 months, a lot can change, this is why some organizations (especially new ones) even opt to do reports every month or at least once per quarter. This helps with decision making and optimizing cash flow for maximum profit.
Forecasting and looking into the future
Especially crucial for shareholders, public companies, or before an IPO, forecasting and future prognosis help all companies attract investors and prepare for the future. If an accountant can prepare a forecast, responsible people could present it to potential investors and expand your company.
Forecasting will help jump and remain ahead of the competition or bring in additional spending cash.
The last piece of advice – outsource
Only 33-40% of new businesses do their accounting in-house. Since it is a tremendously specific and particular profession, it is tough to spot imperfections and monitor their work. You have to trust your accountant and bookkeeper to the fullest.
An easy solution is outsourcing and nearshoring virtual accounting.
Let us show you why an outsourced option can be a much smarter solution.
- Added flexibility. Let’s say you know your accounting needs. For example, if your company needs only 125 hours to manage it, you will only pay for the said amount of hours, not more. When needs expand, you can expand the services as well, just as much as you need, whether it be 5 more or 100 more hours. Whereas with an in-house employee, your company has to pay a salary, even though he or she can sit without many meaningful tasks left to complete
- Workflow improvements. From top to bottom, an outsourced accounting operation will be much simpler to monitor and assign work to. The senior accountant can deal with the more difficult tasks while juniors assist and fill out the gaps while learning the ropes. There is fluid communication between them
- Best results without additional investments.
- Fewer worries. An in-house accounting staff would have to receive competent training continuously. This is handled by our end, when choosing to outsource, instead. From software, equipment, workspace and contracts, proper virtual agencies take care of everything, so you don’t have to. Only assign the work and leave the rest to your remote employees.
- Added value. Receive not only accounting services but also consultations concerning a variety of topics. Beginning with software choice, ending with tax returns and everything that fits in the niche of accounting.
Outro & final thoughts
Accounting is a vital aspect of every business. If your company were a human body, the accountant would be its Central nervous system. It would monitor all of the actions and transmit corresponding signals that help the body protect from dangers and be happier and stronger, both short and long-term. Their work is very complex and challenging; thus, it is highly valued. However, you can opt for less costly solutions for proper accounting by nearshoring instead of overspending.