Many businesses suffer because their accounting process is sloppy and lacks the efficiency more streamlined operations enjoy. But, what you may not realize is just how much those inefficiencies cost. â€œThe average billion-dollar company processes 12,500 invoices per employee dedicated to accounts payable.
That’s about $3.55 per invoice,â€ explains Inc. â€œBy contrast, the companies with the best accounting departments process invoices at the cost of $.35 each â€“ and that can save $40,000 a year.â€
You may not have a billion-dollar company, but the benefits of streamlining your accounting process to be more professional are clear. Here are some ways your business can streamline its accounts:
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Establish a Standard
One of the biggest inefficiencies in some company accounting processes is entering information incorrectly. Streamline your account by establishing standards to prevent this issue. Make sure depreciation and loan schedules are entered correctly and that expenses are coded properly. If necessary, make cheat sheets to ensure everyone sticks to the same standards.
Use Accounting Software
Likewise, using online accounting software, like Sage enterprise resource planning, instead of relying on spreadsheets to record your companyâ€™s transactions â€” and make a point of entering your transactions as they happen â€“ will help you oversee your accounts. Record every bill, and enter every payment the day they happen. Accounting software makes it easier to stay on top of things, helps you make sure your company adheres to necessary accounting standards and ensures you have access to the most up-to-date numbers.
Invoicing your accounts properly will also help you streamline your accounts. Invoice management is about more than issuing a bill. The first step actually begins before the work is ever done or a shipment is ordered. You need to set up standard payment terms, develop incentives and penalties for payment times, and create avenues for receiving payments.
Next, you have to keep accurate records of the time and materials you spend on projects to ensure your invoicing is accurate and analyze your costs to make sure you are priced right. Lastly, follow up at regular intervals after issuing the invoice with reminders of the terms, penalties, and incentives you have in place.
Get Rid of Bad Debts
To streamline your accounts, you will also need to look at your expenses, cut out the ones you really do not need, and get rid of bad debts. Oftentimes, unnecessary costs go undetected. It could be a never negotiated rate or a fee for equipment that you have not used in months. Whatever the case, getting rid of those costs will help you make your accounts more efficient while charging off bad debts simplifies your accounting.
There is a right way to invoice and the right way to record transactions. If you do it correctly, then keeping track of your accounts will be easy, and you can use that information to make more informed business decisions. The more streamlined your accounts, the more you can depend on that information and make informed decisions.
Image source: checking accounts with a calculator