New Year, New You: 5 Tips on How You Can Improve Your Accounting
When the clock strikes 12 on December 31, 2019, we will all officially say goodbye to the decade. The decade has been monumental and has introduced new trends and methods that have revolutionized the world, especially the accounting world.
The latter stage of the decade has signaled the need for automation for businesses. Functions that took considerable time and effort are now replaced by applications and software that make the job easier.
While it is difficult to predict where the dust settles at the end of 2030, you need to ensure that your accounting standards are up to the mark. Given the globalization and the growing significance of the Global Value Chain (GVC), you can expect further digitization of accounting processes.
However, this change is something that all businesses are ready for. Companies around the world are now using means to automate their accounting functions. The automation of accounting gives you the time to focus on the other essential aspects of the business.
Businesses that have automated their operations and are looking to boost their efficiency are doing better than others. These businesses now have a competitive edge over the others as they can minimize their cost of production.
While the need for automation is real and necessary, not all businesses can afford it. Some other factors contribute effectively to tracking business finance. If you are not impressed by the overall recording processes during the year, you can use the following strategies on improving your accounting skills for the New Year.
1. Build a Business Independent of You
Your company culture and the methods you promote affect your overall performance at work. While other factors lead to the poor performance of an employee, the culture and the environment play a significant role in the overall performance.
As an owner of a business, you need to promote a culture that is independent of you. Your business should not rely entirely on your wisdom and instructions. The more independent the company is from you, the more valuable your business is.
Many venture capitalists do not prefer investing in a firm that does not have any employees. They believe that such firms stand a chance of losing their clients in crunch situations. A well-trained staff can help you build relationships and look after the accounting and financial demands of your business too. According to them, well-trained staff or employees are not an expense or a liability but are an asset for a business.
Owners of a small business must look to provide their staff the much-needed exposure. It also helps to delegate functions of the company to the junior employees. This way, they can learn and gain exposure while you can take time off for the other essential functions of the business.
You need to learn to trust the employees and give them a chance to prove themselves. In a competitive environment, a business must work as a team. While you may have your concerns about the abilities of an employee, you can always review their performances by going through the financial records they have maintained.
If you feel that the employees are not ready for complete responsibility yet, you can train them and instill independence in their work.
2. Organize Your Payments Documentation
Tax laws and policies are subject to change. A good company always keeps track of these and makes adjustments in the books accordingly.
A section of your accounts that are affected by the tax laws is the payments section. It is now even more important to be aware of the changes as new tax laws may treat your income differently.
This is something that many businesses get entirely wrong. The documentation for payments does not account for the change in the tax law leading to incorrect figures and insufficient payments. The details of the tax laws will make all the difference for the payments, and moving onto the next year; you need to ensure you get it right.
3. Avoid Over categorization
The categorization of all expenses is necessary for the accurate depiction of the account. However, some businesses make the mistake of over categorizing the expenses, making it challenging for them to record the whole process.
Over categorization of expenses makes the process of recording tedious and monotonous. Rather than mentioning printer, letterhead, stationery expenses separately, you can make a single category of office supplies.
Bookkeeping is already a time-consuming exercise, rather than adding on to the time you should look for ways to reduce it.
4. Utilize Accounting Systems and Process Metrics
In this age of digitization, businesses and their owners have the luxury of delegating or outsourcing their tasks. Rather than spending your time looking after accounting duties, you can focus on the other essential aspects of the business in the presence of software.
There are many accounting software on the internet, you should look for, or that is easy to learn and operate. Not all accountants are technical geniuses; the last thing you want is a complicated financial technology that your employees are not aware of.
The presence of process metrics means that you can compare technology to the previous periods. This allows you to set a benchmark for your team, giving them a goal to work for. It is essential to remember that the process metrics are easy to comprehend and access.
You can use some metrics to assess the number of documents in process, accounting rations, and cycle time.
5. Preparation of Financial Statements
In the age of real-time reporting and the timely preparation of financial statements, businesses have the benefit of pointing out areas of problems and opportunities. This means that the provision of accurate accounting data will go a long way in helping you make the right decision.
All good businesses realize the significance of financial statements for making decisions year-round; this is why they create financial reports periodically.
The availability of financial statements at the time of decision making allows you to make educated decisions and improves the level of compliance. To improve the accounting procedures at your workplace, you need to plan the preparation of the financial statements and ensure the efficient allocation of work between the team.
It is how you interpret the information in the financial statements that determine the success of your business. Setting up a culture of collaboration means that the data is now available across all departments making it easier for them to make a decision.
The collaboration of departments is another thing that you should work for. Accounts and finance departments cannot work in isolation as they rely on other aspects of the provision of numbers.
To make the collaboration successful, you need to find ways to submit data on time. The conflict between the finance team and the other departments can have negative consequences for the business.
The more the various departments collaborate with the finance department, the better the accounting standards. It is the responsibility of the finance manager to explain the concerns of the department to other managers and allow them to tell theirs. You should ensure the smooth flow of data between the various departments.
You need to monitor the performance of the finance department and accounts department, as the data they store can turn around a business. Take immediate notice whenever you feel that the finance team is lagging in performance.
You need to implement the tips mentioned above if you want to improve the performance of the finance department.
Accounting Trends for the Year 2020
To make an effective change in the accounting and finance department, it is imperative to be aware of the trends that will dominate the sector. For the last 5-10 years, the accounting sector is subject to constant change. Small businesses fail to adapt to these changes because they lack the skills required to match the levels of change.
If you don’t want to repeat the mistakes you made during the current year; you will have to adapt to the accounting trends and models. As mentioned earlier, automation will lead the trends in the accounting industry. However, there are other factors, too, which are linked with automation that can drive the industry forward in the year 2020. Here are some trends that you can expect during the year 2020.
1.Data Analytics
As technology simplifies accounting tasks for the user, the industry moves its attention to data analytics. Modern accountants are now taking on new roles as advisors that have a unique skill set that revolves around the analysis of data.
Businesses have realized that analysis of data provides them with valuable insight that can help them recognize improvements in the process that will make the company efficient.
Those who are following the trend closely know that analytics is not new to accounting; the powerful tool allows a business to present financial information in a new light. You can use data analytics for tax, risk management, consultancy, and auditing.
Another trend that the accounting industry should understand is blockchain. Like analytics, the use of blockchain has also revolutionized the accounting industry. The main benefit that the service provides is that it lowers the cost of maintaining ledgers and reconciling.
The technology also ensures the accuracy required for ownership and the history of assets. Blockchain technology provides the user with an unobstructed view of the available resources and obligations.
The accounting industry’s big four are renowned for their use of blockchain trend. The companies have become the pioneers of the trend as it gives them ascendency over other competitors. They use blockchain by making people work in distributed ledger laboratories. By doing so, the companies hope that the unchangeable distribution ledgers will become a reality. This means that the accounting and audit departments will most likely become redundant. Projects based on blockchain have noticed exponential growth in the past few years. According to research published by Statistica, the projects have acquired investments worth $ 1 billion.
2. Cloud-Based Software
Cloud software has now earned a prominent place in digital accounting. However, small businesses are reluctant to use technology. Lack of skill and awareness means that owners of small businesses have not yet switched to cloud-based software.
The adoption of this impressive trend means that you can establish your business as a brand that provides high-value CPA accounting services. FreshBooks, QuickBooks Online, and Xero are some applications that are preferred internationally. 67% of accountants prefer using cloud accounting services.
The subscription agreement that gives you access to cloud storage provides you with the luxury of storing and accessing data. You can access the inbuilt tools and features from anywhere. The data storage facility works well in the case of purchasing orders, multi-currency accounting, payroll, and expense claims.
The cloud technology also gives access to your clients and employees. They can now use the data to resolve issues that are related to the exchange of information and collaboration. You also have the luxury of cutting down or increasing the subscriptions according to the requirements of the business. The research website Accounting Age predicts that 78% of small businesses will rely on cloud-based accounting by the end of 2020.
Conclusion
As an entrepreneur, you should strive for ways to improve the functions of the business. Your goal should be to enhance the performance of every department as overall efficiency determines the company’s success.
You should also be willing to change and adapt to the trends that are making the rounds. You cannot expect to improve the performance of the department and the resulting efficiency if you are not willing to accept the changes required.
Adopting the latest technology and making full use of the features available will help you manage the accounting functions better. Additionally, accepting the mistakes and ensuring that you don’t repeat them will improve the accounting standards and the financial decision making of the business.
Chris Giorgio is the President of Fully Accountable. Fully Accountable is an outsourced accounting firm specializing in eCommerce and digital businesses. Chris has served as a CPA, CFO and has over 14 years of experience in the accounting and finance industry. Chris has dedicated his career towards helping entrepreneurs and high-level business owners achieve greater profitability through specialized outsource accounting functions.
