Top 5 Accounting Challenges and How Small Businesses Overcome Them

1. Top 5 Accounting Challenges and How Small Businesses Overcome Them As the language and integral part of business, accounting plays a critical role in the success of every business operation. It allows you to keep track of your income, assets, liabilities, and expenditures and at the same time helps ensure statutory compliance. Accounting also helps you make important business decisions by providing you with quantitative financial information. A business may fail due to the absence of a proper accounting system. The problem is, many small to medium business owners do not have a solid accounting background or accounting degrees. And given the fact that accounting can be quite tricky and confusing, even basic tasks can become a major challenge if operators don’t have formal or proper training. Let us take a look at the most common accounting challenges that businesses experience and how they are able to overcome them. Payroll Accounting

2. For large businesses, payroll services and preparations are handled by either the HR or finance department. But for many small to medium enterprises and startups, payroll is often taken care of solely by the accounting department. Managing payroll entails more than just entering data on spreadsheets and computing each employee’s compensation. It is an error-prone and time-consuming task that requires you to keep track of the changes in the employment law and regulations. It also entails data management and reporting, record keeping, handling payroll taxes, and payroll cost management, to name a few. One of the effective solutions businesses consider is payroll outsourcing. By using payroll outsourcing services, most (if not all) of the aspects related to payroll accounting are handled by a third-party contractor. This allows businesses to focus on other important matters in their daily operations. Accuracy of matching revenues and expenses If you are using accrual accounting as many businesses do, you have to adhere to the matching principle. This principle suggests that the expenses incurred and the associated revenues generated should be reported in the same period. Matching revenues and expenses accurately can be quite challenging especially if it involves a large number of entries such as service contracts or sales.

3. One way to overcome this challenge is to establish an accounting system and prepare a written policy regarding the calculation of allocation and linking or matching expenses and revenues. This way, you can avoid confusion and ensure the consistency and accuracy of your entries. You may also hire an independent labor contractor or accounting agency to help you create and maintain an accounting system and written policy. Managing, keeping, and organizing receipts Tax-related records like receipts should be kept and organized. The problem is, receipts can quickly pile up and before you know it, you already have thousands of them on your file. Without a proper system in place, it would be challenging for you to manage and organize these receipts. The best solution for this is to sort out receipts and other related records as they arrive according to different categories like type or date. With proper categorization, it would be easier for you to keep and organize your record. For paper-based receipts, it also helps if you have them scanned and stored in organized electronic files. You may also consider

4. saving them in the cloud and keeping a backup file. Some companies partner with a manpower supplier that can provide them with the right talent for this position.