{"id":23068,"date":"2021-04-23T15:44:19","date_gmt":"2021-04-23T10:14:19","guid":{"rendered":"https:\/\/www.techjockey.com\/blog\/?p=23068"},"modified":"2024-06-13T12:18:08","modified_gmt":"2024-06-13T06:48:08","slug":"how-to-overcome-biggest-accounting-challenges","status":"publish","type":"post","link":"https:\/\/www.techjockey.com\/blog\/how-to-overcome-biggest-accounting-challenges","title":{"rendered":"How to Overcome the Biggest Accounting Challenges"},"content":{"rendered":"\n
It is crucial for any business to track their income and expenses. Accounting is the process of organizing and analyzing financial transactions for better decision making. If you make any mistake, it can cause monetary loss, create problems in your relationships with vendors, and obstruct your business growth.<\/p>\n\n\n\n
Knowing the common accounting management challenges and what you can do to solve them will help minimize the risk for your business. <\/p>\n\n\n\n
<\/span>Top 5 Accounting Challenges Faced by Small Businesses & Startups<\/span><\/h2>\n\n\n\n
Manual accounting often leads to unidentified financial errors and management loopholes. Small businesses managing financial processes without automation often face these problems.<\/p>\n\n\n\n
\n
Human Error in Data Entry & Bookkeeping<\/strong>
Manual data entry is prone to errors. And even the slightest mistake in financial data entry can lead to significant monetary loss. Other common types of accounting errors are duplication, entry reversal, omission and more. Manual data entry also results in incorrect data formatting and the misinterpretation of information.<\/p> <\/li>\n\n\n\n
Inability to Manage Business Expenses<\/strong>
Recording and tracking expenses in a logbook or spreadsheet become difficult as the number of transactions increase. This becomes further problematic if you are operating in multiple locations.<\/p>
It takes a lot of time to scan all receipts, manage the database physically. It is tedious to review all receipts and often lead to the error in tracking expenses.<\/p>
Understanding where money is being spent is not easy, and there are chances of fraud too. In this system, employees can make false claims or misreport the numbers to get more money from the company.<\/p> <\/li>\n\n\n\n
Cumbersome Invoice Processing and Payments Collection<\/strong>
In a manual account management process, you first enter the information to create an invoice. Then, you sort invoices, package them and send them to different destinations.<\/p>
The longer it takes, the lesser is the chance to be paid by your clients on time. This often leads to cash flow issues that can cause the business to shut down.<\/p> <\/li>\n\n\n\n
Inventory Mismanagement<\/strong>
Proper inventory management requires knowing the location and status of your goods in real-time. Manual processes make stock status tracking difficult for all types of items.<\/p>
Incorrect stating of stock items results in inaccurate reporting of the cost of goods sold and the net income. If overstated, reporting the cost of goods sold will be less, and net income will increase. There will be errors in the income statement and balance sheet, which no business wants.<\/p> <\/li>\n\n\n\n
Payroll Inconsistencies<\/strong>
Manually monitoring attendance data and making calculations for employee compensation has its flaws. This requires proper coordination, timely verification, and approvals.<\/p>
Such a labor-intensive system is prone to bottlenecks and inconsistencies. It is difficult for the update the data in real-time. This means that you cannot get accurate information for financial analysis.<\/p> <\/li>\n\n\n\n
Mistakes in Tax Filing and Audit<\/strong>
The manual accounting process does not ensure that you are entering valid details, making accurate calculations and deductions, and more. Constant tax reforms make it difficult to keep up, and you could be overpaying in taxes.<\/p>
Manual accounting often means the lack of supporting documentation and overall visibility.<\/p>
There will be an accuracy-related penalty for any unintentional discrepancies in a business’s financial statements during the audit. It can result in the loss of credibility among investors and other stakeholders.<\/p><\/li>\n<\/ul>\n\n\n\n