Business accounting for companies can be difficult. There are multiple challenges that you face on a regular basis, from adhering to strict compliance requirements to managing complicated internal processes and dealing with a lack of data analysis. If not done right, business accounting can lead to discrepancies in financial records, providing an unrealistic picture of the business. Therefore, it’s important you have a qualified and experienced team for the job that can handle accounting operations more effectively and efficiently. In this article, we will discuss various accounting issues in 2021 in detail and suggest the right tools that can help you overcome and even avoid these challenges.
1. Improper Management of General Ledger – The general ledger is the “heart” of your accounting where every business transaction either affects income, expenses, assets, liabilities, or equity. Your bookkeeper or accountant is usually the one who manages that particular list based on your firm’s needs. As a business owner, it’s important that your records are maintained as to what’s due, when, and what has or has not been paid. When you are paying a client cost out of pocket, you want to make sure that they are not only recorded correctly on your general ledger but also seamlessly posted to the matter for reimbursement. This is why having a business expense tracking software is essential to keep track of all your expenses.
2. Not Following State’s Legal Requirements for Business Accounting – In addition to general accounting, you also need to focus on legal compliance. Understanding your state’s requirements—pertaining to business accounting—is really important to ensure you are following the guidelines correctly and not raising any red flags. You should be able to produce whatever is required by your state when the time comes, for example, when there is an audit or just a regular year-end filing.
3. Incorrect Fee Distribution Calculations – Tracking income by individuals and earning distribution or bonuses based on that is a common business practice. It is a great way to understand who brings in what income. However, not all tools and processes cover this. Calculating fee distribution is very complex as there are different variables and factors that are involved in this. Make sure you have a good team to handle these calculations.
4. Overseeing Account Handling Resources – Often, businesses oversee their account management resources. They don’t realize that they lack competent professionals to manage their financial records. To save time and cost, improve the bottom line, as well as to focus on your core areas, it’s better to just outsource bookkeeping tasks, and hire virtual accountants for your business.
5. Not Doing Regular Checks and Balances – The whole point of reconciling is to find mistakes and to rectify them. It could be risky if you have to backtrack through multiple systems and records. You want to make sure that your records remain accurate throughout. Business accounting should ideally be done from the top level and the best way to do it is to have regular checks and balances in place. They may include a review of monthly bank statements, reports, or anything else. Make sure that everything’s happening the way it should be.
6. Wrong Payment of Invoices – When an invoice gets paid, it is updated usually from a billing perspective. Your balance due, whether it is paid or not paid, has an accounting component.
Therefore, the income or reimbursed cost must also be captured to ensure that the dollars are not getting lost in between.
7. Duplication of Trust Records – Trust accounting is an interesting function because it involves your billing, as well as also your accounting workflow for billing. You need to be able to reconcile and report on these funds. So, if you are managing duplicate records, you must have segregated systems that can avoid inaccuracy and compliance issues.
So, these were some of the various accounting issues in business that companies commonly face.