Entrepreneurs keep a lot of the financial details of their business in their heads. Doing so has its advantages: No new software to learn, no danger of a system crash that loses all your data, and you can tweak your budget as often as you need without sitting down at a desk.
But when you don’t have a system in place, surprises can pop up, goals can be missed and paperwork forgotten.
Getting a better handle on money can help you to make and keep long-term goals, smooth out the seasonal ups and downs of your cash flow and maybe improve your profits. It can also help you to stay out of trouble with SARS.
Here are five book-keeping tips:
1. Plan for major expenses
Why it’s helpful: You’re less likely to miss business opportunities or have to scramble for a loan.
What to do: Put events like a major computer upgrade on the calendar at least a year in advance. Acknowledge the seasonal ups and downs. This helps you to be honest about the fact that it’s coming and plan for it.
2. Track expenses
Why it’s helpful: You’ll avoid missing tax write-offs.
What to do: A credit card that you use solely for business can be a basic accounting system. If you always use your business credit card for business expenses, you’re less likely to pay cash and lose the receipts, forfeiting tax-time write-offs.
Routinely jot down business trips, lunches, coffee dates and other events with cash outlays in your electronic or paper day planner. This will substantiate those items for your tax records in the event of an audit.
3. Record deposits correctly
Why it’s helpful: You may be less likely to pay taxes on money that isn’t income.
What to do: Adopt a system for keeping your financial activities straight, whether it’s a notebook, an Excel spreadsheet or software such as Pastel Accounting. Business owners typically make a variety of deposits into their bank account through the year, including loans, revenue from sales and cash infusions from their personal savings.
At the end of the year, you or your book-keeper might erroneously record some deposits as income, and consequently pay taxes on more money than you’ve actually made.
4. Set aside money for paying taxes
Why it’s helpful: SARS can levy penalties and interest for late filing.
What to do: Systematically put money aside throughout the year for tax. Diarise tax deadlines and prep time to make sure you make payments when they’re due.
Payroll taxes that go unpaid can be problematic. Cash-crunched entrepreneurs might dip into employee withholdings that they should have sent to SARS. If you mess with payroll taxes, you haven’t paid taxes due and you’ve taken money that belongs to your employees.
5. Keep a close eye on your invoices
Why it’s helpful: Late and unpaid bills hurt your cash flow.
What to do: Assign someone to track your billing. Then put a process in place for issuing a second invoice, making a phone call and levying penalties such as extra fees at certain deadlines.
Have a plan for what happens if they’re 30, 60 or 90 days late. Some entrepreneurs believe that once they’ve sent out an invoice, they’ve taken care of billing. This isn’t the case. Every late payment hurts your cash flow.
How To Strategically Minimise Accounting Costs As A Start-up
“Financial Compliance can be a costly exercise when approached carelessly”.
As a practicing accountant one of the most common phrases uttered by clients is that “I will get to my accountant when I can afford one”. The reality is your accountant costs can be minimised when you applying some simple tricks to avoid being charged an arm and a leg.
I have compiled a few areas where you can streamline your business to minimise your businesses accounting fees. Please bear in mind these are guidelines and a consultation with your accountant will still serve you best.
1. The ‘Shoe Box’ strategy is dead and gone
The shoe box is a box filled with all your company and supplier invoices jumbled into one box. As an accountant when faced with the shoe box we smile because now we get to charge our hourly rate doing admin that could have been done by either you the business owner or one of your employees. Accountants make a large portion of their turnover from doing admin that could have been avoided if business owners had more foresight.
2. Separate personal from business transactions
Nothing is more time consuming for an accountant then having to comb through a business income and expenses only to realise through consultation with the client that personal items were accounted for as business income or expenditure. As a rule of thumb remove all personal income and expenditure from your business in totality.
3. Record keeping! Record keeping! Record keeping!
Simple record keeping can be your best friend in reducing costs. Here are a few guidelines to live by:
- As pointed out in Number 3 have a separate bank account for business and another for personal
- Date and Number your invoices, sounds simple but very few start-ups put emphasis on this administrative function.
- Provide complete statements for the period requested by your accountant for your credit card and bank statements.
- Keep supplier statements as this will aid your accountant especially during the financial year end of your business.
- When submitting your debit/ card receipts and there is no accompanying invoice list on those receipts what was purchased.
4. Ask your accountant for a Retainer Agreement
A retainer agreement is a great way to ensure your monthly accounting costs do not fluctuate. With a traditional agreement your fees may spike when it is your company’s financial year end or when your taxes are due. With a retainer agreement your able to budget for a set figure payable monthly. This also translates to an attractive for your accountant who can now rely on a guaranteed cash flow injection monthly.
The bases for an accountants pricing will involve what their hourly rate is , the longer they spend on doing record keeping and deciphering what activities took place in your business the more you will be charged. Remember regardless of how close you are with your accountant or how simple you feel your business structure is your accountant will need as much information as possible to represent your business activities accurately on your financial records.
Technology In Accounting – Race For Relevance
Change is not just coming, it’s already here and the rate of change is growing exponentially.
Change is not just coming, it’s already here and the rate of change is growing exponentially. The recent research from ACCA around the race for relevance talks of six key technologies (Analytics, Artificial intelligence, Cloud computing, Cyber, Social and Robotic process automation), likely to present opportunities that challenge our traditional ways of working to all businesses, including SMEs – as well as their finance function.
The report explains that whatever the size of the business, technology change is having an impact.
It is imperative for SMEs to understand these technologies and start to, at least, plan. Failure to capture opportunities runs the risk of businesses being marginalised.
Technological advances provide finance functions with significant opportunities to play a valued role in maximising the organisation’s strategic ambitions and in how it is evolving. Not of all the key technologies may be relevant to all immediately, however, understanding which of them apply and can deliver value, is important.
In this corporate race for future relevance, recognising the opportunity is essential. Organisations are in a race to remain relevant to their customers and communities. Adapting and embracing technological changes in business is critical. Companies who leverage new technology well are going to win big in business. If CFO’s are to remain in decision making roles the need to understand the importance of data analytics is crucial. Businesses need forward thinking CFO’s who:
- understand how to use the information available to them to provide strategic insight in real time;
- capture, measure, report and predict future performance in a much more agile manner to support better and quicker decision making;
- ensure they have in place effective and efficient processes that satisfy the overall business requirements of finance.
This is not to say that there is one approach. No single model fits all finance teams but there is an overall direction of travel. However, its not enough to become more efficient, but finance function must assist businesses to make decisions based on the right data. To achieve the goal of transforming the finance function, the CFO needs an understanding of the emerging technologies and the opportunities available. The CFO must ensure that there is sufficient governance of the data sources, be these internal or externally generated, to provide insights based upon ‘one version of the truth’.
In realising the finance technology strategy, it should be remembered that this is often a partnership between the Information Technology (IT) team and the finance function. As business partnering has affected the relationship between finance and its customers so the same process can be replicated in the relationship between finance and IT.
By 2020, organisations are expected to gain $1.2 trillion in business from their slower-to-adapt peers. How do you, as the accounting professional, influence this today? How do you work with IT to thrive in this age of change?
Can Computers Replace Human Accountants? We Doubt They Can
People remain paramount to the accountancy profession despite advanced modern technology and artificial intelligence. But accountancy is no longer just about financial statements and tax returns.
“The secret lies in embracing the technological advances without sacrificing the values and ethics that sustains and defines the profession,” says Jeanne Viljoen, Project Director: Practices at the South African Institute of Chartered Accountants (SAICA).
“Don’t fear technology – embrace it and use it wisely. By embracing technology, the profession can provide deeper insight to their clients while helping them understand the rapidly approaching ‘new normal’ for business operations.”
The radical transformation of accounting
“It is no secret that accounting has been radically transformed by globalisation, digitisation and a growing amount of technological integration into business operations.
External disruptors, like the use of big data, the cloud and distributed ledger technology also affects the profession, but computers will never replace human interaction or advice.
Computers and algorithms may increase accuracy and can crunch numbers and vast amounts of information at increasing speed, but they have no feelings and cannot learn common sense or the ability to plan creatively. They also cannot deploy human judgement or professional scepticism,” Viljoen continues.
This, paired with a human accountant’s technical knowledge and adherence to a global Code of Ethics and international standards applicable to certain types of engagement, offers vast new potential for accountants to accurately interpret data and develop insights that will underpin more valuable strategic recommendations for their clients.
The focus of accounting is changing
“While traditional services will continue to remain an important part of what accountants do, the focus will be different. The biggest benefit of using artificial intelligence (AI) instead of manual bookkeeping, is probably the time it frees up for accountants to provide strategic advice to businesses and organisations.
Real-time accounting can help small to medium businesses to take decisions when needed instead of waiting for months for financial statements.”
Correct analysis of business data is exactly what gives a business a competitive edge and help generate a higher profit margin.
“If, for instance, your company sell products online, software that enables you to determine when your customers are most active online will help you determine the best time to market to them. The correct technological systems and software can make your business lean and mean and will enable a total overview of your business at the press of a button.”
This can prevent relatively small problems like absenteeism on certain days and over claiming on business trips to turn into big crisis situations.
“This is exactly where accountants will continue to play an important advisory role, because they are trained to analyse risks, and spot outliers, exceptions and trends.”
Accountants can also assist businesses and organisations with cyber security and successfully navigating their digital landscape, helping to avoid cyber fraud and the theft of personal information.
The future of accounting
Viljoen also referred to twelve predictions about the future of the accountancy profession made by Rob Nixon, an internationally renowned accountancy expert. These are:
- Compliance will be completely commoditised, meaning less “human” time spent on ensuring compliance.
- Cloud accounting will be installed in more than 90% of small- and medium-sized entities, because more and more people want their data and information on their mobile devices.
- More than 90% of accounting firms will have cloud practice management, as it improves efficiency and mobility and lowers operating costs.
- Coaches and consultants – even non-financial – will become competition for tomorrow’s accountant.
- Clients will be more transient because of cloud accounting. All that is required for data to be captured is a login code. This will result in tighter and more enduring relationships between client and accountant.
- Offshore teams will be more prevalent – cloud computing will enable your teams to work anywhere.
- Compliance prices will plummet, new systems costs will be reduced and financial reporting will be current.
- Marketing and sales skills will be needed – with commoditised services comes price pressure and new low-cost entrants into your market. Accountants will need to differentiate and give compelling reasons as to why clients should stay with them.
- Young people will not buy into staid and boring systems – they are not interested in old-fashioned systems/equipment and offices. Instead, they will be tech-savvy and will want progress faster than ever before.
- There will be no more time-based billing, but rather a valuation of the intellect that has taken many years to develop.
- The role of business advisor will result in more than 80% of an accountant’s revenue, as accountants can add a huge amount of value when they know the facts. Spending less time on compliance services will mean that an accountant will have more time to truly live up to the trusted advisor status that they deserve.
- Advanced technology will mean that clients are finally served properly with real-time data, resulting in the accountant adding real value to the business.
In the light of all of this, it is important for small to medium businesses to look critically at their digital strategy, she concludes. “You don’t need to buy the biggest, most expensive accountancy system. Look at your cash flow and needs and invest in a system that can grow with your business. Your accountant will be the best person to advise you on this.”
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