Common problems associated with in-house accounting
Common problems associated with in-house accounting
If you are a small or medium-scale business owner, your prime focus should be running your business effectively, smoothly, and profitably. The company needs to make informed business decisions, accelerating the company’s growth and improving profitability.
For making business decisions, the owner shall have complete visibility of the company’s operations, i.e., the revenue, the expenses, the product performance, trends, etc. Adequate and transparent accounting and bookkeeping functions can offer this visibility around the business operations.
You have two options available to handle your accounting and bookkeeping functions – either you can hire in-house accounting professionals to manage all your accounting needs, or you can outsource all those requirements to third-party experts who have worked with various clients from different industries and knows their job well.
This article enlists a few problems with hiring an in-house team to manage the accounting and bookkeeping requirements. f
Problems you might face if you decide to hire an in-house team of accountants and bookkeepers
Here are a few issues that a business may face if the accounting function is managed in-house by an internal team of accountants and bookkeepers:
1. Issues related to cash flow management
Many small and medium-scale businesses fail because they face issues with their cash flows. To effectively manage your cash flows, you must closely monitor your account payables and accounts receivables.
Many businesses just check their bank account balances and get relaxed that they have enough funds available. The availability of funds at a given point in time is not enough. You also need to monitor several other essential things, such as –
- Maintaining extra cash reserves for emergencies
- Tracing the payables and receivables
- Monitoring inventory cycle
- Monitoring cash flow statements constantly at regular intervals
The in-house team of accountants or bookkeepers might not follow all the points mentioned above on a timely basis, given that they would already be bogged down with core accounting work. However, the outsourced agency will keep track of all this and present this information with interactive dashboards, highlighting any emergency or undesirable situation.
2. Delayed receivables
Effectively managing receivables is one of the significant challenges the business faces with an in-house team of accountants and bookkeepers. Because of their ignorance, you might perform a job and not get paid for a more extended period, or sometimes never. It affects the financial position of your business.
The only way to handle this problem is to track your receivables diligently. But, as your business grows, you will experience much trouble looking after the receivables – tracking the same and following up with customers for payment clearance. It is where the need for and importance of outsourcing your accounting and bookkeeping function arises. The outsourcing agencies monitor your collection cycle, update the books, and, wherever necessary, communicates with the customers to process the outstanding payments.
3. Delayed payables
Just like getting paid timely for the work you have done is essential, timely paying to people whom you owe is also necessary. It helps you build brand credibility and make your suppliers trust you and your business.
However, sometimes, your in-house accounting team might not have sufficient bandwidth to keep track of accounts payable, as their primary focus may be collecting cash and not outflow. Hence, the need to outsource your entire bookkeeping and accounting function comes into play.
4. Effective payroll management
Effective payroll management is again one of the most significant challenges faced by companies that still haven’t outsourced their accounting needs to an agency. As a small business owner, you neither have the option to have a dedicated human resource department to take care of your payroll-related activities nor have time to handle payroll leaving aside your core business functions.
Accordingly, in the interest of time to focus on core business tasks and managing the employees’ pay cycle, it is recommended to outsource all those requirements to professionals.
5. Tax Preparation
As the tax season approaches, there builds up stress to meet all those deadlines with accurate and complete data. Sometimes, the in-house team of accountants and bookkeepers may need to be more competent in managing tax filing. You can be stress-free and focus on primary business functions, leaving the tax-related compliance and filing in the hands of an experienced team of experts.
6. Tracking expenses
Managing your expenses and cutting unnecessary expenses is one of the significant aspects contributing to the growth of the business. It is pertinent to track all those expenses effectively and accurately to save costs and optimize the return on such money spent.
If you have outsourced all your requirements to experts, you do not have to stress about accurate tracking of your expenses as they are doing it for you and not just this; they will also provide you great insights into whether an expenditure should be reduced, diverted or suggesting another appropriate strategy.
7. Fraudulent activities and Reconciliation
Reconciliation is again one of the things that need to be effectively taken care of but fails to attract the attention of in-house accounting and the bookkeeping team, as the maker cannot be a checker. It is important to note that reconciliation is one of the primary aspects of checking for errors or fraudulent activities and preventing the same on a timely basis. With the in-house team, there is a possibility of some manipulation of the results for personal benefits, but an outsourced agency would never do that and perform the required reconciliation to track the performance of the company’s resources.
An outsourced agency will have no personal benefit to your business and hence will work dutifully and ethically for your company.
How can CFO UAE help you?
When it comes to selecting between outsourcing all the accounting and bookkeeping requirements to an experienced team of professionals and hiring an in-house team of accountants, businesses are moving towards expert outsourcing agencies’ expert services.
One such outsourcing partner is CFO UAE, managing the accounting and bookkeeping functions of various clients across industries over the years with utmost accuracy and expertise.
