How Accounting Services Can Help a Small Business

Accounting services aren’t just for multi-million dollar corporations. From startups to established family businesses, using an accountant to keep track of income, expenses and taxes can help any company reach its potential. Here are five reasons for any business to consider outsourcing their bookkeeping to a premier accounting provider.

1. Free Up Employees

A company may not have enough paperwork to justify a full-time accounting position. However, when non-accountant employees have to split their time between balancing the books and performing their other duties, they are unable to be as effective as employees who only have to concentrate on one job. By hiring a financial management firm to take care of their accounts, the company allows employees to do the jobs they were hired for.

2. Ensure Accuracy

Keeping up with accounts payable, accounts receivable, tax documents and other financial information can be complicated. Good accounting services employ Certified Professional Accountants, or CPAs, who are licensed and highly trained. By employing a numbers expert, a company is helping to ensure the accuracy of their books. This can help avoid costly mistakes that may lead to litigation or even the closure of the business.

3. Stay Up-To-Date

Tax laws and local regulations change frequently, and it can be hard to keep track of all the updates. Also, if a business is growing quickly, it can be difficult to keep track of the different laws that may apply at different stages of growth. A company can help ensure they stay in compliance by employing a dedicated firm whose sole responsibility is understanding these regulations. The accountant can make recommendations to the business owner about any changes that need to be made or upcoming financial legislation that may be relevant.

4. Limit Liability

Many accounting services provide some guarantee for their work within the initial contract. This means that if discrepancies occur, the service provider will be liable for any mistakes that are found. However, financial disputes can tie up working capital for long periods of time, so it’s still important to do due diligence and choose a firm with a good reputation and solid experience.

5. Plan Ahead

Financial experts will understand all sides of a company’s financial picture, including upcoming budgets. Expert financial analysis can help create a more balanced budget, making it easier to plan future expansions or, if necessary, cutbacks. With proper forecasting, a business will be more likely to have appropriate inventory on hand, have enough funds for payroll, and pay enough quarterly taxes, to name a few examples.

With these tips, a business owner can see why it’s important to outsource their bookkeeping to a professional service provider.

Management and Financial Accounting

Accounting is usually seen as having two distinct strands, Management and Financial accounting. Management accounting, which seeks to meet the needs of managers and Financial accounting, which seeks to meet the accounting needs of all of the other users. The differences between the two types of accounting reflect the different user groups that they address. Briefly, the major differences are as follows:

  • Nature of the reports produced. Financial accounting reports tend to be general purpose. That is, they contain financial information that will be useful for a broad range of users and decisions rather than being specifically designed for the needs of a particular group or set of decisions. Management accounting reports, on the other hand, are often for a specific purpose. They are designed either with a particular decision in mind or for a particular manager.
  • Level of detail. Financial reports provide users with a broad overview of the performance and position of the business for a period. As a result, information is aggregated and detail is often lost. Management accounting reports, however, often provide managers with considerable detail to help them with a particular operational decision.
  • Regulations. Financial reports, for many businesses, are subject to accounting regulations that try to ensure they are produced with standard content and in a standard format. Law and accounting rule setters impose these regulations. Since management accounting reports are for internal use only, there are no regulations from external sources concerning the form and content of the reports. They can be designed to meet the needs of particular managers.
  • Reporting interval. For most businesses, financial accounting reports are produced on an annual basis, though many large businesses produce half-yearly reports and a few produce quarterly ones. Management accounting reports may be produced as frequently as required by managers. In many businesses, managers are provided with certain reports on a monthly, weekly or even daily basis, which allows them to check progress frequently. In addition, special-purpose reports will be prepared when required (for example, to evaluate a proposal to purchase a piece of machinery).
  • Time horizon. Financial reports reflect the performance and position of the business for the past period. In essence, they are backward looking. Management accounting reports, on the other hand, often provide information concerning future performance as well as past performance. It is an oversimplification, however, to suggest that financial accounting reports never incorporate expectations concerning the future. Occasionally, businesses will release projected information to other users in an attempt to raise capital or to fight off unwanted takeover bids.
  • Range and quality of information. Financial accounting reports concentrate on information that can be quantified in monetary terms. Management accounting also produces such reports, but is also more likely to produce reports that contain information of a non-financial nature such as measures of physical quantities of inventories (stocks) and output. Financial accounting places greater emphasis on the use of objective, verifiable evidence when preparing reports. Management accounting reports may use information that is less objective and verifiable, but they provide managers with the information they need.

We can see from this that management accounting is less constrained than financial accounting. It may draw on a variety of sources and use information that has varying degrees of reliability. The only real test to be applied when assessing the value of the information produced for managers is whether or not it improves the quality of the decisions made.

The distinction between the two areas reflects, to some extent, the differences in access to financial information. Managers have much more control over the form and content of information they receive. Other users have to rely on what managers are prepared to provide or what the financial reporting regulations state must be provided. Though the scope of financial accounting reports has increased over time, fears concerning loss of competitive advantage and user ignorance concerning the reliability of forecast data have led businesses to resist providing other users with the detailed and wide-ranging information that is available to managers.

7 Things to Consider Before Buying Small Business Accounting Software

The world of small business accounting software can be a minefield for any business owner. However choosing the right package is one of the most critical business decisions you will make.

Here are the seven things you must consider before making a purchase that will help you achieve your businesses goals.

1. Scalability

Businesses change over time so it’s critical that the small business accounting software you choose can change too. Some

things that often change are the number of products and services offered and the number of employees. When you choose your package try and imaging the business in 5 years or 10 years time and how different it will be. Use this information to guide your purchase decision. It may well be better to pay a little more now for the software knowing that it can be easily

upgraded when needed with minimum disruption and cost to your business.

2. Support

It is important that any software has great support for when something goes wrong (and it always does). Most major companies

offer support but you also need to think about support in your local area. It’s often much easier to have someone locally

come in and do things you need done with your software than have someone trying to help you over the phone. Make some

enquiries with other businesses about the package they use and who helps them.

3. Accountant Interface

It’s most unlikely you will handle every aspect of your businesses accounting. Your accountant is an important factor in making the right decision. What software are they used to working with and what do they prefer? Can you easily supply them data and reports from your package without the need for any extra work (which you’ll have to pay for). Don’t be afraid to ask their opinion as they live and breathe this stuff.

4. Best Value For Money

Once you have selected the right package for your business you may as well get the best value. Shop around as the price can

vary greatly and the product is exactly the same. Online merchants such as Amazon may offer better pricing because of the sheer volume of products they sell. However price is only one part of the equation so if their is great merchant locally with support or installation assistance this may be far more valuable.

5. Major Brands

There are two major players in the small business accounting software market. They are QuickBooks and Peachtree. Microsoft is expected to enter the market soon. I recommend choosing a major brand so that you can get regular updates and you know the company will be around as long as your business needs them.

6. Ease of Use

Ease of use is a personal thing but it is worth trying the software before you buy it if you can. Remember to get the person who will be the main user to test the software as well. Also consider how well the package can interact with other software you use. This is an advantage the Microsoft package may have when it’s available.

7. Features Needed

I touched on this earlier when talking about thinking ahead as to where you business will be in 5 or 10 years time. Most

accounting software packages come in several different versions. If you don’t need certain features now and can’t see a need for them in the future then don’t buy them. The major differences are usually – number of users allowed, inventory management capability and number of reports available.

To sum up think ahead when planning your purchase of small business accounting software. You will make a much smarter

business decision that will save you plenty of trouble and money in the future.