Optimizing Business Accounting Systems and Processes for Better Profitability
Optimizing Business Accounting Systems and Processes for Better Profitability
The verification of any business’s efficiency depends on the accuracy and precision of the accounting and bookkeeping systems. For every business to survive and achieve sustainable growth in this competitive market, it is essential to have a systematic accounting system that presents the facts and statistics to analyze the plan and make intelligent decisions. Thus, a comprehensive and effective accounting system and processes ensure that all your business transactions are tracked, monetary resources are monitored, and utilized efficiently.
Availability of all necessary information in an organized manner and on time can save you from making unrealistic decisions or delayed reporting of regulatory compliance or fines and penalties. Thus, all businesses are required to have an accounting system.
However, once deploying such an accounting and bookkeeping system does not end your job here. It is necessary to ensure that the accounting system used in the business is optimally utilized to its capabilities and functionalities. A periodic examination should be done to understand the system’s operational and optimum capacity gaps. It is time to augment your business accounting systems if discrepancies are found.
This article will discuss a few ways to consider optimizing your business accounting system and processes to ensure accurate accounting and reporting for better decision-making, ultimately improving the company’s efficiency and profitability. Let us begin.
Best accounting practices that you cannot afford to miss
We have listed down 10+ ways that businesses must keep in mind while undertaking accounting system optimization.
- 1. Dedicated business accounts
Many small and medium-scale businesses overlook the importance of having a separate business account and mix it with personal funds. Distinguished business accounts are necessary to track business-related transactions, incomes, expenses, etc. Additionally, having a dedicated business account would ensure that private records are not mixed with business transactions, leading to an incorrect picture of the business’s efficiency and financial position.
- 2. Managing the salaries and reimbursements
The business would have several employees working hard to help it meet its business goals. To manage their remuneration and reimbursements effectively, you need a systematic process and a separate account to record such expenses. It is recommended to have a standard policy to carry out business expenditures through the company’s credit card. If not, there should be a system capable enough to record and track the expenses, mention the nature and purpose of such costs, and record the reimbursement period.
Further, a periodic report should be generated for such expenses to analyze the authenticity and comprehensiveness of such records. It will help to monitor your expenses and cut the cost wherever possible.
- 3. Managing the salaries and reimbursements
It is critical to payout your dues on time. Thus, it is necessary to have a legit and efficient system for accounts payable, which draws your attention to accounts payable regularly and ensures that you do not delay clearing your payables. Such an intelligent system is essential to save you from being categorized as a “defaulter” by your creditors or paying late fees and interest to financial institutions.
The importance of having an adequately managed accounts payable system comes into the picture to avoid your business from any unnecessary financial costs or reputational damage.
- 4. Management of accounts receivable
Managing account receivables requires establishing policies, procedures, and systems for evaluating customer credit, making your customers aware of your credit cycle and payment process, generating invoices, tracking receipts, and timely following up with the overdue debtors. Managing receivables is pertinent in any business as the working capital cycle depends mainly on this collection.
- 5. Adequate training in accounting and bookkeeping
Every new employee onboarded in your accounting and bookkeeping department should be trained and aware of your business’s accounting standards, principles, and processes to ensure desired results and avoid unwanted situations.
Not only should the accounting and bookkeeping staff be trained, but all other employees should be trained and explained the importance of accurate and transparent accounting. Further, other operational departments should be educated about the accounting department’s expectations from different departments and individuals per se to achieve the accounting goals.
- 6. Effective and timely reporting of Financial Statements
Only when the bookkeeping and accounting department works efficiently and optimally can the business expect accurate financial statements, showcasing the correct picture of profits and the company’s standing. Only complete and correct data can ensure realistic and intelligent business decisions.
Accounting systems should be capable of preparing a periodic financial statement, allowing regular monitoring of the same to avoid the scope of fraudulent activities and to have comprehensive reports on time at the end of the year.
- 7. Effective and timely reporting of Financial Statements
Keeping an eye on cash movement is essential to avoid unforeseen circumstances, such as a business running out of liquidity or having too much cash on hand, resulting in a loss of financial income (investment interest).
Hence, to avoid such extreme situations, accounting systems should reflect the cash flow positions regularly and create a forecast of the cash flows, considering the actual transactions and the previous trends related to cash flows. It will readily give you information to prepare for situations like cash shortages so that your routine business operations do not get impacted.
- 8. Effective and timely reporting of Financial Statements
Tax is a complex structure involving multiple rates, exemptions, credits, etc. Further, during the tax return filing period, the businesses are stressed over the issue of collating the data in the required template.
Optimized accounting system and processes can take care of the tax accounting and ensures that data and information required for filing the tax return are updated in the relevant format on a real-time basis as and when any transaction happens. It would eliminate your worry over the tax return filings while ensuring that accurate data is furnished to the authorities and within prescribed time limits.
- 9. Internal controls to mitigate the risk
Accounting and bookkeeping are an integral part of your entire business, which connect various business functions and help you track the progress over each stream, be it production or invoicing or collection and payables. Thus, to ensure that entire business activities are working efficiently, having a robust integrated accounting system is a must.
The system would record the transactions on a real-time basis and furnish a report for the management to analyze the operational position of the business. Such daily analysis and examination of business can help you design relevant internal controls to eliminate the risk of fraud or manipulation within the business organization.
- 10. Reconciliation of bank accounts
Regularly checking your bank account statement and reconciling it with your books of account is one of the significant controls to ensure that your business is safe from fraudulent schemes or manipulation of financial information. Instead of waiting for the end of a financial year, the accounting systems should be optimized to take care of this need; reconciling your books and bank accounts may be periodical.
- 11. Storing and backing up the business-critical data
While managing your accounting and bookkeeping requirements, you should not forget the need for and importance of having the data stored in an organized manner and backing up your critical data. The accounting system should have capabilities to keep the old business data, which can be retrieved in time of need. It helps form and understands your business statistics and trends and the volatile markets’ complexity over the years.
- 12. Integrating artificial intelligence into back-office operations
In today’s modern world, where everything is constantly changing, and technology is taking its place in every aspect, the importance of deploying artificial intelligence for the back-office task cannot be overlooked. Such technology in your accounting and bookkeeping functions can help you save time and efforts that can be diverted to something more productive. Further, it reduces the possibility of human errors and ensures accuracy in the outcome.
Final words
Considering all the points referred to above, you can have the most optimal and efficient accounting system to support your operations and make your business more productive and profitable. To achieve this, you can always seek the help of the experts like CFO UAE to offer customized services to optimize your accounting systems and processes.
