Tweak Your Biz » Finance » How Can Small Businesses Fill The Accounting Gap?

How Can Small Businesses Fill The Accounting Gap?



Managing the resources that go into accounts can represent a real Catch-22 for small and medium businesses. For many companies, a full time accountant is simply not financially feasible. Responsibility for issues like VAT returns and billing then falls to managers or directors.

Managers and directors are typically occupied reacting to more pressing matters and so these accounting responsibilities tend to be put off. This results in cash flow disruptions and even  fines which ultimately leaves even fewer resources for accounting.

For companies that do have full time accountants, those accounting resources tend to be monopolised by day to day accounting requirements such as payroll and revenue recording. In house accountants rarely have time to contribute their expertise to broader management tasks such as important financial decision making.

This is unfortunate as they will potentially understand the financial status of the company better than anyone. And again, financial decisions made without their input will potentially provide lower returns leaving fewer resources for accounting.

How Can Small Businesses Fill The Accounting Gap?

Outsourcing Accounts

The challenge then for small businesses is to leverage the accounting resources they do have more effectively.  One way they can do this is by outsourcing some of their accounting requirements or through the use of management accounting services.One of the key benefits of outsourcing accounts for smaller businesses is that they can get support in the particular area they are struggling with rather than having to outsource all of their accounting requirements.

Payroll

The relatively complex requirements of payroll can be a challenge to meet, particularly for small companies . However, failing to get payroll in on time is not an option for businesses that wish to keep running. Outsourcing payroll relieves this pressure at a cost that is far less than that of failing to meet payroll.

Billing

Unlike payroll, billing is far easier to fall behind on. No one is going to urge you to send them bills. However, falling behind on billing severely disrupts cash flow which can lead to other more serious problems such as being unable to meet payroll. Outsourced billing will keep a healthy cash flow that allows a business to meet its obligations and grow at a steady pace.

VAT Returns

This is another accounting requirement for small businesses that often goes on the long finger due to lack of resources. Unfortunately, filing late VAT returns can result in fines from Revenue which in turn leaves even fewer resources to put into accounting.

Management Accounting

For larger, medium sized businesses where full time accountants are on staff, a similar resource gap occurs. Standard obligations such as payroll, billing and VAT returns are all met but these typically use up all of a company’s accounting resources.

This means accountants do not have time to provide their skills and knowledge to the overall running and development of the business. Management accounting services provide businesses with expert accounts analysis and advice that helps them to better evaluate their situation and make more informed decisions.

Services might include preparing bi-monthly or quarterly reports to determine whether a company is in profit or loss. This provides immediate information rather than waiting for an annual audit from the accounts department when it might no longer be useful.

Management accounting services might also include providing a business manager assistance in negotiating with their bank or other financiers. A company’s in house accountant might be very experienced in carrying out their ordinary accounting duties but may not have adequate experience in financial negotiations.

Use Resources Strategically to Grow Your Business

For developing businesses, outsourcing specific accounting tasks can be a highly effective means of meeting their accounting requirements without having to take on additional staff. Companies can target their resources very accurately to the areas where they can provide the optimal benefit and return.

Consider what areas of your business’s accounting needs could be managed more efficiently through outsourcing.

Images: ”Outsourcing concept with interface and world map on blue background / Shutterstock.com

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The Author:

Colum is a Fellow of The Chartered Institute of Management Accountants, having qualified in 1990. He gained over 15 years experience in Irish business, such as Irish Biscuits ,Bewley’s , Digital and Sharptext, before forming a Management Accounting practice in 1995. This business flourished and is now Guardian Management Accounting. He was president of The Dublin and District Branch of CIMA in 2006. He has also been Chairman of the Members in Practice Committee of CIMA from 2000 - 2006. In addition he represented CIMA on the CCABI Taxation Committee in 2005/6. He is a member of the Networking Group Business Network International - BNI and has been chapter director on three occasions. http://www.guardianaccountants.ie

Add Your Comment

  • http://www.tweakyourbiz.com/ Sian Phillips

    Welcome to Tweak Your Biz Colum and a great first post. Being an accountant myself I’m all for outsourcing as it’s obvious that small businesses don’t need a full time accountant but also a “once a year” check up from the accountant isn’t enough either. Every business will need a different scale of time and skills so by outsourcing they can “fill the gap” perfectly and it can be changed as the business progresses. I look forward to your next post.

  • http://www.guardianaccountants.ie Colum Whelan

    Thanks for the feedback Sian,
    yes we like to think that by scoping a job and fulfilling the client’s needs
    with the right staff, we can really deliver a good value service.