When and How to Grow your Accounting Tasks?
Accounting is the first and foremost function that a business owner who has just started his business executes. Accounting helps a business by providing a prism, which shows different financial scenarios to the business owner and as a result, it enables a business to take effective steps to improve their financial position.
Accounting function initially starts with basic functions which are handled by one or two people. When a business grows and expands its operation, they tend to change their accounting functions has their requirement increases as they are dealing with more finance and complexity also rises. So, you will require people to cater this ever growing requirement.
There are Three simplified steps, which will give you information on how to do the same:
#1. Part-time or External service finance Professional:
When a business commences its business operation, it does not requires a full-time finance person to look after their accounts. But, it is really important to keep proper and precise accounting record from the day one. If you don’t have the required skills, then you can always utilize a part-time professional and/or a service. For that, you need to fulfill three distinct tasks:
Setting Up and overseeing your Accounting system:-
Any company which is commencing their business needs a proper accounting system which simplifies the work of business owners to take the proper financial decision. Now for this, an accounting software can fill the void and can satisfy the need of a business owner. An accounting software will provide you with the charts of account and will help in determining the format for the financial reports. As the business grows, issues will pile up from the day books were initially prepared. You will want to review your setup periodically and make the needed adjustments.
This is the task which requires the most modest skills as compared to those whosoever is setting up your accounting system for you. Bookkeeping is the day-to-day entry of daily transactions into your accounting system and also the preparation of cheques and invoices. Now you can either take this task on yourself, or you can employ a part-time person to do so.
One tip is to avoid using cash and instead make sure you run all transactions through the checking account or a company credit card. This will give you a record of every transaction. Another tip is to make sure that you review any money that leaves the company.
You will require a person to prepare your tax. This skill is although different from the above-mentioned jobs, but the person who is setting up your accounting system may also have the skillset to prepare the same for you. Based on your business, you may need to pay sales tax, payroll taxes, quarterly estimated taxes, etc. Tax preparation can get complex at times so consult an expert for that.
#2. Full-time Bookkeeper, with part-time CFO:
As the company grows, business transactions also increase eventually and as a result, it will take more time in keeping books of accounts. Eventually, your part-time bookkeeper will become a full-time one or it will make more sense to hire a full-time employee rather than continuing to outsource your bookkeeping.
With employing a full-time bookkeeper will also generate a need for a person with the skill set that has a broader and deeper sense of finance. For this, a company requires a Chief Financial Officer (CFO). In this stage services of a part-time CFO can be availed.
This CFO should review the bookkeeper’s work and be available to answer questions. They will closely work with the owner to interpret financial statements and internal metrics, develop financing strategies (e.g., with banks and investors), tackle tax planning, establish internal controls, develop forecasting budgets and, depending on the industry, handle compliance issues.
#3. Full-Time CFO:
There will eventually come a time where it will become necessary to hire a full-time CFO rather than a part-time one. For the small businesses, this point is reached when the cost of part-time CFO is equal to what you can pay a full-time employee. With a full-time CFO, you will be required to expand your internal accounting staff. This will include someone to handle payroll while another person will handle accounts of payables and receivables.
Accurate books are essential for running any small business effectively. Unfortunately, it is an often overlooked task. You should make sure that you have the proper accounting support as your business grows.
- Posted on Dec 26, 2017
- By Dhruv Rudani
- 0 Comments