5 Reasons Why SMEs Need an Accounting Firm
- BY Hector Law
Project Executive, FastLane
- Jul 15,2020
- 15 Mins Read
Accountants always have a place in ensuring businesses run smoothly, regardless of size or industry. While it is common for SME owners to handle accounting responsibilities themselves, these tasks undoubtedly become more complex and time consuming as the business grows. When this happens, business owners are often hesitant to engage an accounting firm when their prior arrangements were working fine. Here are five reasons as to why hiring an accounting firm can help a business.
1. Minimizing Potential Costs
Hiring full time, in-house accountants is often less economical than outsourcing accounting tasks to a professional accounting firm. When hiring in-house accountants, business owners have to incur costs to acquire tools and resources necessary to enable accountants to perform their job responsibilities. These are unnecessary expenses that SMEs do not have to incur, especially considering that accounting firms already have access to these resources and utilize the latest accounting software.
Engaging an accounting firm can help an SME save on the above costs as accounting firms typically base their fees on the volume of their clients’ transactions and the time spent on providing support. These conditions are variable and dependent on the company's business activities. Therefore, engaging an accounting firm can possibly save more in expenses as compared to employing in-house accountants which is a fixed cost to the company.
Accounting firms can also save businesses from pitfalls through their knowledge of local accounting practices, tax compliance and planning. Incorrect tax return filing, missing deadlings or an incorrect understanding of local regulations might lead to non-compliance. In the event of non-compliance, heavy penalties and fines may be imposed.
2. Freedom to Focus on Revenue Driving Activities
As SME owners are often hindered by the need to handle all aspects of their company, areas such as accounting can often be neglected. To manage and review every detail of accounting, information takes time that many businesses do not have. If a business owner lacks accountancy knowledge, carrying out accounting work takes even longer and can often result in errors.
Outsourcing the accounting related work to an accounting firm can save valuable time allowing business owners to focus on key revenue driving activities. The economies of scale offered by professional accounting firms allow SMEs access to a pool of resources and knowledge larger than what in-house accountants can typically provide.
3. Learn More About Your Company's Financial Performance
Having access to, and analyzing quality financial information can help a business owner improve the profitability of their business. Accounting firms can help clients interpret various financial measurements, produce reports to analyse the financial health of a company and can help identify any red flags for the client.
Accounting firms can create business forecasts and budgets to help companies develop their business strategies. By helping clients understand what aspects of their business are the most profitable and the key details of their cost structure, companies can make an informed decision to reallocate resources to improve their profitability.
4. Improve Your Company's Cash Flow Management
Accounting firms can provide tips and implement tools such as Xero to improve cash flow management. Such firms will often provide a cash flow report on a monthly basis. By using cloud accounting software such as Xero, they are able to make these reports available to clients in real-time, letting them know precisely what money is flowing in and out.
With this help, SMEs will be able to recognize when their receivables and payables are due and how to structure their cash flow accordingly. By anticipating their coming cash flow movements, an SME can structure their payment cycles with vendors and improve the receivables collection from clients in such a way to maximize their cash reserves.
5. Experience Seamless Audit Coordination
Audits are a task that has strict requirements placed onto them. As such, SMEs must hire a certified accounting firm that is qualified to conduct audits. Firstly, they can address complicated accounting questions and act as a company's point of contact with their auditors. When an audit is conducted, auditors will examine a company’s financial statements to determine if they are in compliance with local taxation laws, accounting and auditing standards. Well prepared financial statements improves the likelihood that an audit will go smoothly. Auditors will also be able to direct their questions towards the accounting firm and relieve the burden from the business owners.
While many SME business owners are under the impression that it is imperative for their business to stay lean and flexible, there are certain aspects that should not be compromised on. As accounting is an essential aspect of a business, SMEs should consider engaging a professional accounting firm to reap the benefits that they provide.
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