The accounting system is the most vital tool for any small business owner. It helps ensure your business runs smoothly and efficiently. How you record your transactions, keep track of everything, and manage your finances depends on the type of accounting system you choose.
If you cannot ensure the accuracy of your accounting systems, you might not be able to provide reliable reports daily. In turn, it can be hard for you to track your cash flow, which affects your finances. Aside from that, employees may feel that their workplace isn’t secure enough, which could prompt them to find stable employment elsewhere.
If you want to improve your current accounting system, it’s best to consider this five-item list:
Outsourcing A Credible CFO
If you’re not the most financially savvy person on board, it’s time to hire someone who is. Find a chief finance officer (CFO) who can bring credibility and solid experience. You’ll need this person to help you manage your business’s finances and ensure you’re on track with your bookkeeping.
A chief finance officer can also advise you on processes from budgeting and forecasting to tax laws and financial planning. However, it would help if you considered several factors before outsourcing your CFO. Having the right reasons to outsource your CFO can help you identify whether you need someone who works remotely or in-house.
In addition, determining whether you need someone specializing in small businesses or large corporations is essential before you make a decision. This can help you focus on how much experience they have in accounting and finance, as well as how they run businesses like yours so that they can meet the company’s needs.
Reviewing Your Business Goals
Another thing to consider is understanding what you need from your accounting system. You can improve it by reviewing your business goals and objectives. It’ll also help to assess whether any changes are required to meet your goals, including changing pricing structures or adjusting your profit margin. In doing so, you ensure that these changes will also reflect in your new system.
That said, communicating with your accountant is essential so they can guide you in making a list of vital business goals. These objectives might include increasing sales, reducing costs, or improving customer service.
After that, think about what you need to achieve these goals. For example, if one of your goals is to increase sales, perhaps you need more customers or better marketing strategies.
Assessing Your Current State
After identifying the most important goals for your business, assessing your current accounting state will help you identify areas that need improvement. Once you do so, you can take note of the strengths and weaknesses of your current system by reviewing how it supports your company’s needs.
You can start by analyzing the current level of efficiency in your business. You could use tools like the Pareto chart, which shows how much of the company’s resources are used by each department. The Pareto chart will also show you if you can cut unnecessary costs from your budget.
Prioritizing Tax Deadlines
Another essential item on this list is preparing for Tax Day. The internal revenue service (IRS) requires businesses to file their taxes annually. However, if you don’t have an effective accounting system, you might have to pay additional taxes as you file quarterly tax returns.
In addition, you’ll need to improve your accounting system to prevent missing deadlines and penalties from the IRS. Meanwhile, if your company has just started, it’s best to focus on getting your payroll done first. Payroll taxes include contributions to Social Security, which have different deadlines than income tax returns.
Aside from that, ensure you have all your employee information available in one place, including social security numbers, addresses, and birthdays. This strategy lets you quickly access this information as you file payroll taxes throughout the year to avoid missed deadlines.
Using A Cloud-Based Platform
If you still use traditional and manual systems, you may incur bookkeeping errors, causing you to overestimate your budget. Using cloud-based accounting software can help you improve your accounting system by automating many tasks involved in keeping track of your company’s finances.
Meanwhile, accounting involves time-consuming processes like developing and maintaining accounts that show your company’s financial position. This process is also vital in helping you track expenses and income to create budgets that might help you make sound financial decisions. However, you’ll need more powerful technology to store the increasing amounts of data.
With cloud-based accounting software, this technology allows you to access your account information anywhere with an internet connection. Additionally, this tool doesn’t require installing software on your server, so you don’t have to invest in additional hardware for setup or maintenance.
You can enable your team to access financial documents simultaneously without worrying about syncing data between systems, avoiding cybersecurity threats.
When running an organization, it’s best to ensure that your bookkeeping processes are accurate. By following the tips discussed, you can significantly improve your accounting system. Plus, you can avoid costly IRS fees while enabling you to budget your finances properly.