What causes accounting problems?
So many things can throw your books out of whack, having a ripple effect on your business operations, financial outlook, and even your team. Several red flags lead to confusion and inaccuracies. Your accounting software, fraudulent activities, internal controls, and misapplication of generally accepted accounting principles (GAAP) may be to blame.
How do businesses solve accounting problems?
Whether you want to plan for the future or solve for the here and now, there are easy ways to get your accounting system in check. These five pain points give businesses migraines, but we’ve got your pain reliever.
1. Revenue Recognition Issues
Sales must be complete to count toward revenue, so poor accounting practices that don’t follow this rule of thumb can leave your books a mess. That’s why improperly applying GAAP revenue recognition standards, creating fraudulent revenue schemes, and using unreasonable estimates can create revenue recognition issues.
Luckily, it’s easy enough to course correct when things turn upside down. When you work with an accounting services partner, they’ll lean on best practices, such as using accounting software to manage recurring billing and verify compliance with Financial Accounting Standards Board (FASB) standards. But your own team should know the basics, so take the time to get schooled on applicable standards to comply with GAAP revenue recognition.
2. Payroll Errors
If you’re calculating your own payroll and payroll taxes—or are trying to account for maintaining a remote workforce—you may have an uphill accounting battle. Unless you have a pro accountant working with you, this could mean more errors and problems complying with tax regulations.
But your team needs to get paid appropriately, so how can you guarantee they will? Outsource your payroll to an accounting services partner that will use cloud-based payroll software to calculate all the important figures, including:
Paid time off
Of course, you can’t forget to pay the piper either. Your partner can also go the extra mile to provide support for multiple jurisdictions and their unique tax laws.
3. Incorrect Cash Flow Statements
Without the right strategies at work, your cash flow statements could become more of a mess than the helpful tools they’re supposed to be. Consider a few common issues:
Let’s say your cash flow statements include misclassified operating activities for interest and dividends received and paid. To rectify this, get your accounting team up to speed on FASB changes and best practices for cash flow statement preparation. Don’t have an accounting department? This may open an opportunity to work with professional accounting services.
Alternatively, your accounts receivable and payable processes could need a facelift to ensure steady cash flow. Get organized and put processes in place to monitor expenses, past-due invoices, and operating cash flow. Use this information in your daily cash reports—you’ll start seeing fluctuations that can inform other decisions.
4. Outdated Accounting Software
Maybe you have accounting software, but it’s behind the times. The wrong tools don’t give you what you need—taking your accounting one step forward and three steps back. Fill in the blank: “My accounting software ... ___________.”
❌ Is inefficient
❌ Lacks real-time capabilities
❌ Requires manual data entry
Solve your problems by shifting to the cloud. With it, you can clean up the big, hairy, on-premise software infrastructure that comes with legacy software. On top of this, cloud accounting software helps your accounting services team with daily operations, such as:
Month-end close processes
No one wants to think the worst of their own team, but the fact is there has been an uptick in fraud. Case in point: Fraud activity increased 57 percent between Q2 and Q3 in 2020. The good thing is that fraud and embezzlement often happen because companies just have poor internal controls—something that’s easy to fix with the right accounting services and tools.
Snuff out fraud by using accounting software to uncover fraudulent expenses. With it, you can flag questionable expenses, sort between intentional fraud and errors such as duplicate payments, and even discourage fraudulent behavior. Your accounting partner can take things a step further by performing a budget versus actual analysis, following up on significant differences, and validating vendors before paying them.
Make any mess manageable.
Revenue, payroll, cash flow—oh my! Your accounting can take a turn for the worst, but with time-tested solutions, technology, and the right accounting services partner, it’s no sweat. Need help managing your accounting system? Ignite Spot has a track record of success in helping businesses out of the trickiest jams. Explore our services and find the package that’s right for you.