Common Accounting Challenges for Small Businesses
Accounting plays a vital role in the success of any small business, yet many don’t have the personnel or resources to properly address their accounting needs. Because of this, there are several common accounting challenges faced by small businesses in managing their financial processes. Accurate and efficient accounting can determine the success or failure of a small business, so business owners will want to make the effort to find the right professionals to help meet these challenges head on.
Challenge 1: Limited Resources
Nearly all accounting challenges that small businesses face can be traced back to their limited accounting resources. Small businesses are often operating with razor thin margins. Employees are often wearing many hats and working on tasks that are not in their official skill set. This has always been a challenge for small businesses, particularly when it comes to accounting and human resource tasks. Accounting is a challenging task, as making sure that all practices are accurate, compliant, and complete is not only important to a profitable business, but to making sure that you are operating within tax laws. The amount of paperwork and information can be overwhelming to anyone who is also running a business.
Challenge 2: Compliance Burden
Tax laws change often. Using outdated software, outdated practices, or simply being unaware or out of date with current tax laws can cause issues with compliance. The penalties for non-compliance can be significant, resulting in audits, fines, and other consequences. To ensure that you are always in compliance, it is crucial to stay up to date on all changes in tax laws that pertain to your business. This means that anyone involved in small business accounting needs to have exceptional attention to detail, organizational skills, and the time to dedicate to this important task. Outsourcing to a professional, even on a limited basis to assist with tax planning and preparation, can make a big difference in the success of your small business.
Challenge 3: Manual Data Entry and Processes
There is always room for human error when accounting processes are done manually. A simple miscalculation, mistake in data entry, or omission can cause weeks of headaches and frustration. Spreadsheet based accounting is not only inefficient, but is unnecessarily risky with all the other options available to business owners. Using an updated accounting software system is far more efficient and considerably less prone to human error. Some small businesses, particularly newer businesses, may be hesitant to invest in new technology, but embracing the possibility to automate and streamline accounting tasks is often well worth the investment.
Challenge 4: Cash Flow Management and Financial Planning
Cash flow is one of the most difficult things for a small business to manage, particularly in periods of financial uncertainty. In addition, many small businesses lack comprehensive financial planning and effective forecasting for sustainable growth. Looking for expert advice to help develop long-term growth strategies can help set small businesses up for success. An accounting professional can look at the financial picture and help develop strategies for the most effective cash flow management. Many small businesses have limited financial visibility, and a bookkeeping professional can assist in obtaining real time insights into the financial health of the business and develop strategies for improvement.
Challenge 5: Employee Training and Skill Gaps
You have hired capable professionals who understand the needs of your business, but that doesn’t mean that employees – even long-term professionals – don’t have skill gaps as accounting technology and practices evolve. The importance of ongoing training and development for employees involved in financial tasks can’t be understated. Continuing education that helps professionals adapt to changing times and new technology will help your business stay current and your financial practices stay efficient and effective. Accounting technology is rapidly transforming and can provide significant savings and increased productivity. Employees who are expected to handle multiple time-consuming tasks, especially those they are not familiar with, can experience burnout. Employees who are burned out and stressed are more prone to mistakes, which can be costly. To avoid these issues, make sure that the professionals who handle your accounting are well-trained in the most current practices and can dedicate the time needed to keep your books accurate and up-to-date.
Challenge 6: Lack of Integration Between Systems
When all business processes are allowed to exist in a vacuum – all functioning as independent systems separate from one another – challenges can arise. Your accounting system should be capable of integrating with the rest of the business administration systems. As technology continues to grow and advance, seamless integration is possible and will help you obtain both efficiency and accuracy in financial management. This can eliminate many errors that come from working with several different systems that don’t communicate well with each other. This can cause inefficient invoicing and payment processing, which will then result in delayed payments, late invoicing, and challenges with cash flow. With the right integration between financial systems, invoicing and payment processing can be greatly monitored and improved with little additional work.
Being proactive about accounting challenges is the best way to avoid costly errors. If you wait until you are facing an audit, looking at a cash flow crisis, or scouring the books to find a minor human error, you are putting your business at risk. The best way to avoid these accounting pain points is to find the right professionals you can outsource to who can make sure that your planning is sound, your books are organized and integrated, and your tax responsibilities are being met. Knowing when to look to an accounting professional can make a real difference in the success or failure of your small business. To learn more about how we can keep your books accurate with efficiency, contact In Balance Bookkeeping Solutions today!
