As an entrepreneur, your main focus is always on how to grow your company. To do this, you and your salespeople need to be good. At the same time, you need to ensure that your costs are managed well. There are many ways of managing costs. One of them is to outsource some of the noncore parts of your business. This is the main reason why many companies outsource marketing, content, and auditing processes. In this article, we will look at the top reasons you need to outsource part of your company’s accounting processes.
Cut Down on Costs
As mentioned above, most companies like to cut down costs because they operate in industries with thin margins. As a result, they slash multiple types of costs such as marketing and auditing. Similarly, you should consider outsourcing these services to trim your spending budget. This is because accounting is not one of the core parts of a business. For example, if you run a restaurant, you are in the business of procuring inputs and selling meals to your customers. As such, you don’t need to have an entire team of accountants. This will be expensive and inefficient for you. Instead, outsourcing accounting to companies like IFSA Experts can help you save money.
Better Use of Time
As an entrepreneur, you have a lot of work to do and focus on. You have employees to pay, a company to market, taxes to pay, bills to pay, and a brand to maintain. As such, it is always important that you minimize the work that you have to deal with. One of the easiest tasks that you can outsource is accounting. This is the main reasons why most big companies like Apple, Microsoft, and General Motors outsource part of their accounting processes to companies like Deloitte, EY, PWC, and KPMG among others. As a small fast-growing company, we recommend that you do the same as well. It will help you manage your time well.
Over the years, studies have shown that most companies that are victims of fraud are small companies with less than a hundred employees. The median amount of funds that are lost to fraud is about $147k. Part of the reason for this is that most small companies don’t have a financial controller or an accountant who has a good understanding of fraud protection. Outsourcing accounting tasks can help your company achieve more success. It can also help you identify key vulnerabilities.
Accountants Know Accounting
We are all gifted and skilled differently. If you run a restaurant, chances are that you are a good chef. If you run a furniture store, chances are that you are good at woodwork or carpentry. The same is true for other sectors. In all this, you might not be good at accounting. This is where having a good accountant comes in. Accountants know accounting. They know the rules, the industry, and how to address accounting issues well. Therefore, outsourcing an accountant will help you have someone who knows maths and the accounting industry.
In summary, one way of running an efficient company is to outsource things that are not core. Getting a good company that does accounting and auditing can help you achieve efficiency and profitability.
Around 75% of Americans are personally handling their finances with no help from advisers or accountants, according to a recent CNBC survey. Accountants are generally believed to be only necessary for entrepreneurs and businesses. The reality of the situation is that accountants can be good for your personal finances, too. Not only can they assist with annual responsibilities like filing taxes, but they can provide valuable tips to uncover financial savings and other tips.
A whopping 80% of Americans missed updating their W-4 tax forms, according to data from H&R Block. If you’re among that number, you may end up with a smaller tax refund that you were expecting. Other common filing mistakes are sending the files to the wrong IRS office and failure to list down all dependents. Consulting an accountant or hiring one can help ensure that all your tax forms are current and updated. They can also help familiarize you with the process so once you feel confident enough, you’ll be able to do the filing yourself. This not only saves you time but it saves you from making mistakes that may end up costing you any penalty fees.
Financial Statement Compilation
Americans take out loans for a wide variety of personal reasons. Loan providers will generally ask that you turn over pertinent financial statements which can include your annual income and any expenses. This is helpful if you’re aiming to borrow from an unsecured loan provider than bases their approval on credit history and income. An accountant can help you compile your financial statements. They can also help you compare unsecured loan providers so you can make the best choice. This way, you can have a better understanding of what repayment scheme fits your income.
49% of Americans feel concern over their cash flow management, according to a study conducted by MarketWatch. A common issue with cash flow management is a failure in the proper allocation of funds. This is particularly true for people who have multiple financial responsibilities like loans, mortgages, healthcare payments, and tuition. An accountant can help give you the lay of the land when it comes to your cash flow. They can explain how much comes in and how much should go out. They can also help you determine any adjustments that need to be done to your income or expenses.
An accountant isn’t just someone you should visit when you have financial woes. In fact, regularly consulting with a trusted accountant can help spare you a lot of stress down the road. So when you are able, try and locate a professional that can help you navigate the sphere of your personal finances.
Some of the latest figures show that an estimated 4 in 10 people do not know their credit score. Additionally, many business owners are confused as to how to obtain and build business credit, and how their personal credit score affects their ability to access loans for their company. Whether you are your only employee, or you’ve hired a sizeable staff, making it a point to monitor your credit scores can help your company succeed in the long-term. In addition to closely tracking your business accounts, be sure to keep close tabs on both your business and personal credit scores for the following reasons.
Good credit scores can help you obtain bank loans
Improving your chances of obtaining finance by boosting your personal and business credit score can be crucial to the long-term success of your company. If you hope to one day get a business loan from the bank, you and your organization must meet strict financial standards. Although you’ve likely had experience in getting a car, personal, or home loan, these financial products are far easier to obtain than a bank loan for a business. Your revenue, the amount of time you’ve been in business, and other factors must be met (and often, exceeded) to receive any kind of funding. In fact, one of the top criteria is that you must have both solid personal and business credit scores. If either one is lacking, you can automatically be denied for the loan.
You get better interest rates on loans and credit cards
As with all types of loans and credit cards, your credit score can help you get better interest rates on financial products for your business. This is especially important if you are looking to apply for a loan through a less traditional source. These companies often have much higher interest rates to start than a standard business bank loan. The current range for traditional business loans is between 7.75% – 10.25%, whereas non-traditional loans to fund various business expenses can go as high as 30%.
Allows you to purchase business insurance at the best rate
Business insurance helps companies “protect their financial assets, intellectual and physical property from a covered loss due to risks such as lawsuits, property damage, theft, vandalism, loss of income and employee injuries and illnesses.” In order to obtain business insurance, some providers require that you have a business credit score. Although this is not required by many, having a good credit score will help you access lower premium rates.
While tracking your company financials, don’t forget to keep a close watch on your personal and business credit. Not sure how to build your business credit? Experts recommend opening a business card, paying off any existing balances, and working to correct any errors that appear on your credit report.
As can be seen with the demise of the mighty Enron, effective HR management is an integral part of any business. It’s about paying attention to detail and that means counting dollars and cents where it matters. For accountants, glaring mistakes are often noted on their client’s financials and nowhere is HR mismanagement more evident than on the income statement. Manual HR processes tend to leave too much room for interpretation, which could leave the employer open to risk. With the right systems in place, not only can employers reduce their risk but also improve their bottom line.
Choose The Right Talent The First Time
The statistics are not in favor of an employer where a bad hire is concerned. The U.S. Department of Labor estimates that a bad hire costs the company at least 30% of that employee’s first-year earnings. Onboarding new staff members cost businesses thousands of dollars and that figure spent on the wrong person is a tough figure to reconcile when the hire is bad. A good hire, on the other hand, will have a direct accounting effect which the figures on the income statement will reveal.
Invest In Staff Growth
Richard Branson says “Train people well enough so they can leave, treat them well enough so they don’t want to”. A well-spent investment on staff will ensure that the bar is raised in the company which means a direct effect on the sales. An improved sales turnover contributes to a healthier income statement. An investment in staff is a direct investment in the workforce and very rarely does this investment have a nil return. The effect is not only felt on the production floor but can also translate to employee interactions with customers, which have a direct effect on sales. It can also lead to an in-house accountant or bookkeeper to keep track of those numbers while the business focuses on what it does best.
Opt For Effective Workforce Management Tools
One of the biggest loopholes to affect an employer’s bottom line is ineffective workforce management. This is because there is no way to carefully monitor the comings and goings of staff, and leave management is not properly documented or transparent. Staff can be empowered through workforce management tools as they are able to manage themselves more effectively, placing less pressure on supervisors and managers. Developers Advanced Systems Inc suggest integration of different aspects of workforce management can be key to streamlining and effective, efficient business practices. It provides management will have a bird’s eye view of the workforce at any given time.
Is The HR Department Profitable?
Profit is the main topic of conversation when business owners sit down with their accountants. It’s not often that business owners look at the HR department purely from a profitability perspective, however, this is a division that can add directly to the bottom line. According to research, at least 50% of a company’s profit relies on the internal happenings of the business. There are a number of ways the HR department can make or break a business, and one of those is legal considerations. The right contracts and preventative measures ensure that the business focuses on other areas that help build profit.
Human capital is one of the biggest assets in any business, and time and money spent developing this side of the business often reap great rewards. The HR department is at the heart of every business and has a direct impact on the income statement, a very important consideration for any business owner.
When we launch a startup or open a small business, it can feel like we have suddenly become a ‘jack of all trades’. From manufacturing our product of offering our services, right through to answering the phone, performing administrative duties, and even taking care of basic accountancy, no task is too small or too time-consuming. As we begin to achieve the success we have worked so hard for, one of the wisest steps we can take, is that of hiring an accountant. Indeed, those in the know argue that we shouldn’t even consider starting a business until we have received professional advice. An accountant can suggest the most appropriate business entity for our situation, help us avoid common pitfalls, and advised us on financing and how to mitigate risks.
Important Advise on Financing
When your business reaches an intermediate stage, you often have to consider additional forms of financing to enable you to expand your products, services, or premises. Unless you deal in financial services, you can undoubtedly benefit from an accountant’s advice on which type of financing to go for. A chartered accountant will be aware of SBA loans (developed to support business growth) and be able to present various options (including standard business loans, short-term loans, etc).
You should be especially vigilant about long-term loans, ensuring you pay the least amount of interest possible, so you have enough liquid funds to invest in new
Reducing Your Tax Bill
Tax laws are continually changing, and chartered accountants are always the first to find out about amendments that could affect your business positively. Incentives, tax breaks, and new penalizations can significantly affect your profits or losses. Forms can also be time-consuming to fill in, so leave the difficult work in hands of an accountant and rest assured that your business is totally compliant with current tax legislation.
Advise on Growth
Accountants are experts at analysis; by studying your books, they can analyze cash flow patterns, make important suggestions regarding how to cut costs by varying inventory, suggest interesting price changes, and highlight ways your company can move in new directions.
Helping You with Audits
So long as your financial matters are in the hands of a qualified and dedicated accountant, you needn’t worry about having to prepare an audit if required. Your accountant will be able to offer you support and explain communications sent by the Tax Department. An audit is no reason to panic if your finances have been in order from the start.
We are all experts in our own respective fields, which is why finances should be left to a professional accountant. Issues such as our business entity, financing, and tax matters, can be difficult and time-consuming to comprehend. By relying on an accountant, we can ensure that everything is order, risks are kept to a minimum, and we invest in what we truly know: making our clients happy with products or services we believe in so much, that we have based our professional life on them.
Your credit score can affect you in a number of ways and this can extend beyond your personal credit abilities. Many small businesses feature an interplay of personal finance and business finance. Did you know that a study by the NSBA found that 27% of US businesses were not able to secure their required funding? Furthermore, 25% of them said it prevented them from expanding.
With the link between personal financial health and business financing needs, a bad credit score can influence your business’ ability to expand and succeed. To avoid these side effects, there are many tools and information resources available to business owners. If you are one of the many entrepreneurs that are looking for help in overcoming these effects, Crediful can help refinancing with bad credit.
One of the most important ways a poor credit score can affect your business is by restricting your borrowing ability. When seeking funds, banks and lenders will look at your business credit score and your personal credit score. According to the Small Business Administration, a total of 65 percent of small businesses utilize a credit card or business loan. A low score signals to the lender that there may be an inability to repay the loan in the future or an inability to effectively manage your finances. To your creditor, this can be seen as too risky.
Although some small businesses do manage to secure financing with a low credit score, a higher premium is often charged to compensate for the higher risk. Therefore, financing may not be as flexible as many other small business loans. Higher interest rates and finance charges then filter down to your business’ bottom line, impacting the profit margins.
Trade & Creditors
A good credit score is not just vital in securing business financing but may also affect your interactions with creditors. Many vendors including property real estate companies consider your credit score when determining whether to do business with you. This is especially applicable to trade creditors as their credit terms are often adapted and your business may be faced with a very short repayment deadlines.
Poor credit can affect your ability to secure any financing at all and therefore, chances of your business even getting off the starting blocks may be very slim.. If this happens, you may be forced to consider alternative forms of financing or the use of collateral such as your home.
However, there are ways and many financial tools to help you turn your credit score around. Although being hampered by your credit score can feel defeating, there are many small business grants and lenders specifically for people in your situation.
Whether you’ve been knitting, painting, creating pottery or making jewelry, you may find that your hobby has become more than that, and you are starting to make money. The rise of websites such as Etsy, Artfire and other craft and hobby blogs, have made it easy to sell your products and wares online. Every small business needs to exceed when it comes to accounting and keep records for their taxes. Having a good control of your finances will mean that you are able to grow and expand your small business as you want to.
When does your hobby become a business?
To determine whether your hobby is a business, the IRS will ask a series of questions. The two most basic questions are:
1. Are you putting in the effort and time with the intention of making a profit?
2. Are you relying on the income from the hobby/business?
It is important to establish this, as running a business will mean that you can offset any related expenses against your profit when you are declaring your small business profits. These deductions can include materials that you have used as well as a deduction for use of your home space for your business. If you are turning your hobby into a startup, you need to keep a firm track on any deductions you want to make. This will help you with your taxes.
Keep a separate bank account
In order to keep your accounts and taxes simple and transparent, it is a good idea to open a new bank account for your small business. This will help you see when you’re spending on your own personal expenses and help to ensure that you aren’t making any tax deductions that aren’t related to your business. Industry professionals GR-US.com suggests keeping a separate bank account to help maintain a positive cash flow. If the IRS wants to request an audit or look further into your accounts, this will make life easier. It also looks more professional, especially if you are requesting direct bank payments from customers.
Use a software accounting package
Investing in a good software accounting package (like Clever Accounting) for your business is a must. This will help you to keep track of your cash flow and expenses. It will also help you to accurately invoice customers and the payments they have made. Using a good accounting package can help transform your hobby business into a thriving enterprise, giving you the time to focus on your products and services.