5 Ways You’re Wasting Money On Accounting
Top 5 Reasons Your Company May Be Spending Too Much On Accounting
1. You have in house accounting employee(s) that you are paying by the hour
This is one of the most expensive ways to get your accounting tasks done. A small accounting department may consist of 2 to 3 clerks who manage different parts of the books – A/R, A/P, reconciliation, etc. Even if each one is making the average wage of $15 per hour for 20 hours per week each, you are paying out $2,400 on the low end, plus an extra 7.65% for payroll taxes. Assuming your clerks are manually inputting transactions, you are also increasing the likelihood that your books will be riddled with errors (not because they aren’t skilled, but because they are human), causing your CPA bill to increase at the end of the year.
2. You have an erroneous or overly simplified chart of accounts
This is a common issue for small business owners. You started your company, knew you needed an accounting system, and ran through the set-up wizard for your software of choice. All good, right? Not really. While the default chart of accounts for your industry may work for your CPA come tax time, who only needs to see money in and money out to do your return, you are missing out on a major source of value of a properly set up accounting system – valuable financial information that helps you make better decisions, and therefore, more money. The more detailed and customized your chart of accounts and your class tracking, the better your financial statements will serve your company. Don’t leave money on the table.
3. You are using out of date software that is being sunset
This is the trouble with desktop software – you either need to update every few years, or risk your software not working correctly. Need support? Well, too bad, if you’re on an old system. Intuit has announced a sunset for older desktop softwares recently. This means no customer support, no payroll, no bill pay, and no online banking support for versions older than three releases. If you play ball and update, that usually also means re-learning the interface and new features of the newer software.
4. You are only concerned about your financial statements for tax or banking reasons
This ties in neatly with number 2 above. Approaching your accounting function as an overhead cost that is necessary for tax compliance is the first step to financial failure. There is so much useful information that can be unlocked with regular study of your company’s finances. Just a few things we have helped uncover for clients in the past include – bad management practices, employee theft, product/service lines that were unprofitable, new markets for existing services, and new profit centers. Numbers don’t lie. There are some really great data visualization apps available that can do a lot of the number crunching and digging for you once setup correctly. See CrunchBoards and Spotlight Reporting.
5. You are not watching your Key Performance Indicators (KPIs)
This goes along with number 4. KPIs are little metrics tailored to your company that tell you how you are doing in certain areas of business at a glance. Think of these as gauges and dials on a car dashboard, but for the financial health of your business. Using the business intelligence apps described in number 4 above, it is now possible to build business dashboards with custom KPIs that use real accounting data driven by your bank account. This means you swipe your debit card or collect payment, and your dashboard reflects the change, without the need for in house staff or waiting 30 days to “close the books”. The result is on demand, accurate, custom information for your daily decision making for significantly less money than a skeleton accounting team. It’s a brand new world we live in.