Small businesses face many challenges and roadblocks while carrying on their day-to-day operations as compared to larger organizations that are well equipped to encounter them. Small business owners juggle between various tasks and thus accounting as a business function takes a back seat, which ultimately affects their business growth, profitability and survival.
Some simple solutions that can go a long way to help small business owners deal with accounting challenges are:
1.Managing Cash flow Effectively
Small businesses need to make efforts to improve their cash flows. They need to keep a close watch on their receivables and payables to maintain a steady cash flow. Proper cash flow management helps in smooth business operations. It helps small businesses to analyze various expenses and also forecast future cash requirements. Small businesses can manage cash flows effectively by ensuring that:
- customers are invoiced on time
- expenses are reduced or minimized
- timely collection of receivables
2.Tracking expenses and revenue
Small businesses sometimes do not bifurcate personal and business expenses. This leads to spending too much money on non-productive activities. If expenses are not tracked carefully, they would not be accounted for leading to frauds and misrepresentation of transactions. Along with expenses, it is equally important to track the receipts. Proper tracking of receipts enables small businesses to identify the sources of funds and allocate them appropriately for various business operations.
Automated expense and receipts trackers can help small businesses by:
- eliminating the need to store receipts, as they can be scanned and uploaded
- reducing and flagging fraudulent expenses
- immediate notification of receipts
- periodic reports as charts and diagrams to identify the major source of income and expenses
3.Budgeting and Forecasting
Budgeting helps to keep unexpected expenses at bay. A carefully prepared budget prepares small businesses to allocate their funds for necessary expenses and also ensures that there is a scope for saving some funds in case of unforeseen events.
Forecasting helps in examining sales, expenses and future cash flows in order to help businesses meet their goals and objectives. It is very important for small businesses to invest in forecasting tools that use historic data and market trends and present various scenarios to help small businesses face future challenges.
Small businesses should engage in the budgeting and forecasting activities as they help in:
- Identifying expense and income patterns
- Accessing real-time market situation
- Building financial models to access liquidity and sales position under different market conditions
4.Investing in accounting system and software
Small businesses should spend a fair share of their funds by investing in a good accounting software/ system. A good accounting software helps small businesses to stay dynamic and competitive in its operations. Several cloud-based accounting systems that make use of artificial intelligence are now available at affordable prices. The accountings systems are highly flexible and can be integrated easily with the existing systems to provide several advantages like:
- Easy, quick and accurate financial reporting
- Quick access to accounts and business transactions from anywhere
- Convenient process to make and receive payment
- Reduced use of workforce to do mundane accounting tasks
- Data integrity, etc.
5. Compliance of taxes and statutory compliances
Small businesses are preoccupied with a lot of work and it may happen that they miss on important tax due dates or compliance requirements. Non- compliance of statutory compliances leads to huge penalties, which add-on to the burdens of small businesses. Advanced accounting tools and software have in-built tax and compliance trackers which prompt the upcoming dates and help small businesses stay compliant. Filing and paying taxes on time and adhering to all regulatory and statutory compliances help small businesses by:
- Staying up to date about the benefits of tax related schemes and deductions provided specially for small businesses
- Using tax rebates and tax credits
- Fulfillment of taxation and statutory obligations
- Increases the creditworthiness and goodwill of the business
6. Hiring an outsourced accounting partner
Small businesses should not shy away from taking help from experts, especially for their accounting needs. Small businesses lack accounting knowledge, which may lead to improper accounting and record management.
Hiring an outsourced accounting service provider is a one stop- solution to every accounting challenge faced by small businesses. They specialize in accounting and have a pool of professionals who totally focus on business finance. These outsourced service providers take off the pressure from the shoulders of small businesses and provide quality service as per the needs of the business.
As these outsourcing firms cater to various businesses in different sectors and have a lot of experience, and can be of great help to small businesses who are new to many challenges. Using the services of an accounting service provider maximizes the performance of small businesses as they can focus totally on their business operations.
Small businesses facing accounting challenges need to understand that help is always at hand. Small businesses must entrust their accounting functions to third-party service providers who use advanced software and provide various functional services. Accounting is a specialized function and professional experts can always help small businesses to stay a step ahead by providing them with their services.
Diligen is one of India’s best financial service providers who helps small business owners in their accounting needs. They provide a wide range of accounting and bookkeeping, legal and tax solutions which are highly customized to suit each client’s business needs. The highly experienced professionals at Diligen help small businesses encounter all accounting challenges with ease.