Important Elements of Accounting and Bookkeeping—and How Outsourcing Can Help!

Accounting and bookkeeping are vital for your business. Maintaining accurate records of your business accounts and transactions provides reliable information for decision-making. It’s also a financial and legal necessity as your bookkeeping records allow you to create financial statements that stakeholders use to make decisions.

Your income and expenses must be properly organized so you can create budgets and allocate your financial resources effectively. Reliable financial records allow you to set growth goals, meet government regulations, and ensure compliance with tax laws. Many businesses fail to carry out this integral aspect of their business.

Here are some important elements of accounting and bookkeeping that you should know:

Accounts Receivable

Account receivable is the most crucial element of your business’s cash flow. It measures the money that customers owe to your company and helps calculate your income and profitability. If your business offers a credit line to customers, you must keep track of accounts receivable regularly to ensure you receive the payments for the goods and services you offer.

Accounts receivable records allow you to perform various analyses. For instance, you can apply the receivable-to-sales ratio to determine the percentage of sales that have not yet been paid. A lower figure suggests that customers and holding their end of the bargain and paying your business timely. It’s a positive indicator meaning no action is needed.

On the other hand, a higher figure is a red flag, showing that your business is having trouble receiving payments. You can send inquiries and reminders to delinquent customers about the non-payment and take appropriate action in case of failure to pay. Accounts receivable also help determine bad debt allowance, ensuring your profits are not overstated.

Accounts Payable

Accounts payable are your company’s short-term liabilities. Like your customers, you may also get the flexibility to pay for the foods and services later. Your creditors will give you a specific period to settle your invoices. You must keep accurate records of all the liabilities to ensure you don’t forget to pay your financial obligations on time.

The performance of your accounts payable reflects your company’s reputation. If you don’t settle your invoices on time, your vendors may discontinue providing you goods and services on credit, which can hamper your business cash flow. It’s also a highly vital part of your working capital that you must consider when creating a budget.

Accounts payable can also give you insights into your business performance. Moreover, you can analyze the figures of discounts offered and captured to see whether your business takes advantage of early payment discounts. Similarly, you can evaluate late payments and penalties to determine losses and learn about supplier relationships.

Payroll

Payroll is also one of the most critical aspects of your business. Accurate payroll records ensure that employees are paid correctly, financial obligations are met, and tax and other withholding responsibilities are upheld. Bad payroll management puts a business under a threat of a bad reputation, hamper employee engagement, and lead to high turnover.

Benefits, perks, and correct compensation are some of the primary responsibilities of the payroll department. Payroll management is among the most administratively taxing tasks, which can be time-consuming. It’s essential that payroll be performed regularly. You may need to employ additional resources to ensure the accuracy of your payroll.

Payroll key performance indicators and reports can also help analyze costs and track various processes within a company. You can evaluate training expense, overtime costs, and differences in salary types to make informed decisions pertaining to employees’ workloads, overtime schedules, and staffing.

Tax Preparation

Taxes are the financial obligations of your business. Your company’s taxes should be done correctly to ensure compliance with tax regulations and avoid costly fines and penalties that can affect your business’s bottom line. Tax calculations can become quite complicated and overwhelming as your business grows.

One of the crucial aspects of tax preparation is looking for ways to minimize tax liabilities. Businesses are eligible for various tax benefits. For instance, they can utilize previous years’ losses, claim deductions, and use credits to reduce their tax burden. Sometimes, you can delay the sale or purchase of assets to minimize your taxable income.

There’s a significant difference between tax evasion and tax avoidance. The former is concealing information from tax authorities, and it’s illegal. The latter is a legitimate way to reduce tax liability while remaining compliant with tax provisions. Accurate and timely tax preparations is essential to avoid trouble with tax authorities.

How Outsourcing Can Help

Outsourcing your accounting and bookkeeping operations is an excellent strategy to meet the growing needs of your business. A professional outsourcing services provider can handle complex accounting and bookkeeping responsibilities and generate timely financial reports to identify new potentials and opportunities.

Partner with a reliable BPO to ensure compliance with industrial accounting practices and receive timely accounts releases and accounting reports. Professional third-party service providers perform rigorous double-checks to ensure accurate records. They also provide monthly financial reports to help identify weaknesses in existing financial practices.

Leveraging accounts receivables outsourcing services allow you to cut down the costs associated with accounts management. They handle all the responsibilities, including invoicing, bad debt calculation, and more. Accounts payable outsourcing services ensure timely payment processing and minimize debt management burdens.

Similarly, payroll experts allow your company to meet obligations to your employees and comply with regulations. You can also work with tax consultants to reduce your tax burdens and identify potentials for tax returns. This way, you can maintain compliance with tax laws and avoid paying more taxes than you need.

You should look for a reliable company that offers a wide range of finance process outsourcing services, including accounting bookkeeping service, payroll management, tax management service provider, and more. It will allow you to divert financial and human resources on core areas and focus on more strategic aspects of your business.