Well-organized real-time accounting

A well-organized and real-time accounting provides a comprehensive overview of the company’s financial results and current financial position. At the same time, real-time accounting provides the company’s manager with the necessary data-based input for making management decisions. A Well-structured accounting not only ensures good compliance with the law but is also a prerequisite for successful business management. This is an important part of the company’s day-to-day operation.

Experience has shown that many business leaders do not consider it necessary to manage their comapany’s accounting in a way as to receive consistent and high-quality input. Poorly managed accounting, or the lack of it, can severely damage a company’s reputation. If the company’s financial activities, including tax optimization, growing its reserves, invoice and bill payment and receipt deadlines, are not well planned and monitored on an ongoing basis, the company may unexpectedly face financial difficulties. This could compromise the company getting a loan in the future and in the case of late tax payments to the tax authority, the interest fees can often be very high.

Also, if the accounting is handled by personnel who do not have sufficient accounting knowledge it may lead to additional tax liabilities or excessive tax paymenyts – thus unneccessary costs for the company.

Solutions

If you do not have the time and/or skills to organize correct real-time accounting, it is advisable to look for a reliable partner or, depending on the size of the company, consider hiring an accountant who would look after your finances.

There are several different possibilities available to manage accounting.

Friend-accountant

A company initially decided to manage company’s accounts on their own. However, entrepreneurship is proving to be successful and the volume of accounting is growing, and various tax nuances already require professional accounting knowledge. The head of the company involves a friend, who is an accountant, in the organization of the accounts.

Pros: The solution is convenient because it is easy to communicate with a friend on complex topics and it is easy to hand over work.

Cons: A friend carries out the work as a friend and has an inability to say ’no’, usually they would be doings this on top of their main job. The end result may be the same – the company’s accounting is not properly done and is sloppy, or not done at all. And since it is a friendly agreement, the friend-accountant has no real responsibility to deliver. This can lead to an unwanted additional cost for the company or a decline in reputation. On top of all that, it’s one way to lose a friend.

Buying a service from an accounting office

A major upside of buying a service from an accounting office is consistency. In most cases, they have a fairly wide range of skills and have good practice of work in place. However, many large offices still don’t really think with you, except for those are consciously set out to offer a personal approach for small companies.

Pros: Since more accountants work in a larger office, they often have a greater knowledge basis and competence than an accountant working individually. They can also ensure that an illness or a change of an accountant would not affect the quality of your company’s accounting. Also, their base price is often very competetive.

Cons: A large accounting firm is undoubtedly less personal, there is usually no direct communication between the business manager and the company’s accountant. The low base price for accountancy offices often means that any additional work will be billed as an additional service. Accounting firm whose base price is more expensive, usually include more services. (Always check the set of services before signing the contract).

Hire an accountant

When ordering a service from an accounting office, the price is usually based on the number of hours worked or transactions made. In the case of an in-house accountant, it’s important to keep in mind that, in addition to the payroll there other costs, such as hiring, set-up, office expenses, employee training, etc.

The general principle is that as long as outsourcing is cheaper than hiring an in-house employee, an external service should be used. However, if the volume grows to such an extent that the price of the service is equal to the cost of maintaining the employee, it is worth considering hiring an in-house accountant.

It must also be considered that a paid accountant has no substitute during annual leave and sickness. Also, there is a routine, daily part of work as well as a more complex part of analysis-reports in accounting, and latter two often might be too much for one role to carry out. One option is that the easier daily duties can be done by your employee and the more complex part is outsourced. Or vice versa, according to the complexity of the company.

Recent trends show that more and more companies prefer to outsource their accounting services instead of hiring an accountant. In Estonia, the limit for buying the accounting service is about 10-million Euro annual turnover.

Pros: An in-house accountant is always there for you and you can get quick answers to your questions. The accountant performs their duties within working hours, which means that you do not have to pay extra for reporting, etc.

Cons: Hiring an employee comes with a relatively high cost, which only pays off if your company is larger and / or if the cost of purchasing an accounting service is equal to or greater than the cost of hiring an employee.

Monitoring of financial statements

In order for a company to be successful, having well-organized accounting is not enough if financial results are not monitored on a regular basis. Unfortunately, many company executives ignore the financial statements sent by the accountant and only look into them when financial problems arise. Regular monitoring of financial statements allows company managers to identify and anticipate potential problems before they arise.

As a common practice, the accountant would send you a financial statement for the previous period at the beginning of each month. Please do not ignore these but read the content and always feel free to ask the accountant for more information if something is not clear. Don’t be embarrassed if you don’t understand the content of the report at first glance, ask the accountant for further clarity. This would be good for the cooperation between you and the accountant, and closer communication provides an opportunity to discover problems in the reports from the very beginning (in case the accountant is missing some information) and to obtain objective information for the successful management of the company.

In addition to the company’s general financial statements, balance sheets and income statements, which enable you to oversee company’s well-being, you can monitor the following reports in real-time accounting:

• Accounts Receivable Reports – It is very important to ensure that customers pay their invoices on time and send reminders quickly should they be late.
• Unpaid purchase invoice reports – A failure to meet our obligations on time can have very upsetting consequences. Credit is no longer given or worse – a cooperation is terminated.

As always, depending on the specifics of the company, it is always good to be clear with the accountant how and in which timeline reporting is done, which will help to better manage the company.

In conclusion

By having your accounts organized by an experienced accountant, you can be sure that your company’s accounting is in order and for your day-to-day management decisions you can use a simple SisiFlow money planning tool which helps you to make your ongoing management decisions – the bills you have to pay today, to see the opportunity to spot best times to make investment or to pay out dividends.

Another thing to keep in mind – cash flow problems can be serious and risk your ability to stay in business. If you do not have financial experience or do not yet have your own accountant, please consider working with SISI Finance or another financial expert.
Together with an expert in your field, you can efficiently organize the company’s accounting and set up a system for tracking the necessary financial data, which will, both, help you successfully manage the company and become a market leader.