Business owners around the world often need to wear multiple hats. Their responsibilities range from the brand establishment to getting the appropriate talent onboard while putting best efforts to maintain long-term customer-business relationships. In the meanwhile, they usually run into different business problems, and accounting issues are big ones.
As a business owner, you surely want to keep track of your business accounting and, more importantly, of the profits it generates. Accountancy typically involves recording, organizing, and analyzing financial transactions that further help you determine profit & loss and plan your investments accordingly.
No doubt, accounting, for a business owner, is a complicated process to carry out efficiently with precision. Moreover, many other common challenges arise while you handle your business finances that really need to be tackled. Therefore, in this article, we will discuss some of the top accounting problems businesses often deal with and how to solve them.
Today’s Biggest Accounting Challenges
- Variation in Accounting Methods:
It is vital to keep detailed reports of every cent that gets debited in and credited out of your business account, to prevent ending up in the red and struggling to find what went wrong. For example, if a business manages to cash in one system and chooses another system to manage accounts payable, this can lead to difficulties in knowing how much capital is available to spend and how many debts are getting paid off.
In other situations, when the business decides to combine both, the cash records are mixed intricately with the accounts payable, but they both have independent accounting methods, here the real problem occurs.
Thus, ensure that you comprehend the types of accounting methods being followed in your business before you make big decisions, such as changing the way you keep your books.
- The Implementation of Tax Cuts and Jobs Act:
The Tax Cuts and Jobs Act is being considered as one of the biggest and the most complicated tax reforms by many business owners around the world. Even professionals that provide accounting and tax services might take a fair amount of time to comprehend the reforms. With this, it is pretty evident that understanding and implementing the tax law changes is challenging for business owners (that don’t even have a passion for accounting).
To remain in compliance with the changing tax laws and regulations, it is advised to use accounting software that gets automatically updated when the law amendments are done. You can also read more about the Tax Cuts and Jobs Act to find out ways to take multiple advantages such as deductions and minimizing your tax liability.
- Recruiting and Retaining Qualified Accounting Staff:
Staffing is already a significant expense as you don’t only pay accountants salary but benefits too that include employee compensation, insurance, paid leaves, 401(k), etc. Adding to these, you might also need to get more office space, computers, software subscriptions, etc. Although having a staff of accountants will make your accounting processes streamlined, it is not usually easy to recruit and retain qualified, experienced, and skilled talent that specializes in delivering business accounting services.
- The Era of Automation and AI:
With always developing technology, many business operations are now easier to carry out, and accounting is one of the most benefited one. Yes, automation has reduced accounting workload and turnaround time, while the use of artificial intelligence is helping businesses with financial forecasting. However, if some of the processes are solely handled by automation and AI, there is still a need for humans to review the work done. Due to this, businesses have to get their staff trained to understand how these technologies work and how effectively the same can be used for accounting operations. This also increases their expenditure owing to training sessions.
- Cash Flow Problems:
Cash flow management is a big challenge for all types of businesses. Cash flow problems are responsible for the failure of 82% of businesses that couldn’t survive, according to one U.S Bank study. Many businesses (especially small-size businesses) find it challenging to gather designated funds to manage recurring expenses and keep the business running. To address cash flow problems, you should review bills thoroughly and be consistent to follow up on accounts receivable.
- Fraudulent Reporting:
You surely don’t want your business to be involved in a fraud, simply because it is illegal and can damage your business drastically. But you might not get to know if your accountant has fraudulent intent. If he defers your gross profit using dirty tricks in preparing financial reports which are strictly not accepted by GAAP, your business will have a misleading representation of its financials. Though with this, you might become able to lower your tax return, this could lead to severe repercussions in the long run. Other fraudulent activities, such as entering and presenting false figures in financial reports, can damage the reputation of your business if it undergoes an IRS audit.
- Cybersecurity Concerns:
Accountancy is widely done on cloud in the digital age, having many businesses adopting cloud accounting solutions. But with the growing use of this revolutionary technology, cybersecurity concerns are also rapidly increasing. Businesses want their financial information safe and secure in servers as they don’t want to be a victim of a data breach.
The United States spends the most ($1.56 million) on response to the data breach, according to the Ponemon Institute’s Cost of Data Breach Study.
- Payroll Management Issues:
Payroll management is literally a tedious task as it requires crunching numbers, plenty of numbers. Moreover, payroll accounting is one of the processes that are most vulnerable to mistakes and typographic errors. The most common payroll management problems include unorganized reports of employees’ work time, incorrect calculation of leaves, overdue payments, incorrect tax returns, human errors, administrative workload, compliance issues, etc.
The solution to most accounting problems discussed above can be accounting outsourcing services. Even accounting firms also often face these problems at different times, for example, during heavy workload, tax season, or when some employees go on leave or leave the firm suddenly, etc. Outsourcing is an effective solution for them too! Here’s how it delivers multiple benefits to both.
- Save Time:
Businesses that outsource their accounting functions to a reliable outsourcing partner can save enough time to focus more on their core business operations.
- Cost Cutting:
By outsourcing, you can cut down operating costs. On average, a full-time accountant makes $18 to $23 per hour, whereas accounting outsourcing companies usually charge you $10-$15 per hour. Moreover, many companies also offer a defined fee structure for an entire accounting project.
- Reduced Fraud:
Your budget for your business might not allow you to invest in hiring an additional staff that will supervise your accountants. On the other hand, your outsourcing partner would have a team of auditors that ensure your business financials are safe and secure, and accounting is in the hands of trustworthy accountants.
- Skilled Talent:
As outsourcing companies manage accounting for different types of businesses, they tend to have a wide array of accounting knowledge. Adding to this, they examine accountants thoroughly before hiring. Thus, you can rest assured as industry professionals will handle your business accounting.
- Scaling Opportunities:
With having an outsourced accounting team, you can save a significant amount of money, as discussed above. You can utilize the saved money for the betterment of other business aspects that have room for improvement.
Similarly, CPAs and accounting firms can outsource the services they are not having in their catalog, but some clients ask for it. Outsourcing is also an opportunity to handle more clients when you have limited resources.
Let’s now read some of the outsourcing stats
Businesses that use client advisory services from an accounting firm report greater insights of financials and higher profits, as per a new survey.
Companies are likely to perform better when their accounting is outsourced, according to a study conducted by Bill.com, CPA.com, and AICPA.
80% of clients of CAS service providers say they get more time to focus on their business.
While many business owners are thinking out of the box and taking advantage of accounting outsourcing services, others are putting their best efforts to go digital by utilizing accounting software and adopting cloud accounting solutions. They are no doubt reaping benefits of streamlined accounting but might be spending a considerable amount for both the accountants and the software. Thus, it would be fair to say that outsourcing, in multiple situations, is an effective strategy to lower expenditure, enhance efficiency & productivity, and drive overall business growth.
Financial and accounting uncertainties are common in businesses, but it is also essential to address these issues when there is still time. Are you also facing any business accounting issues? If yes, know that there’s a solution to every problem. Get in touch with Accounting To Taxes and get appropriate and prompt solutions to your accounting problems. We are one of the leading accounting outsourcing companies having more than 11 years of experience in the outsourcing industry. For more details on our services, call us at +1 646-688-2821 or email at [email protected].