Defeat Your Accounting Dragons
True story. It was late 2018. I had just started working as a lead accountant for a reputable business on St. Maarten. On the surface everything seemed great! The business had a beautiful office, great people and provided good pay and benefits. However, less than two weeks into my new job, I began to discover that “accounting dragons” lurked in the shadows. The business was several years behind on its yearly financial reporting, made use of in-efficient bookkeeping processes and had an overwhelmed accounting team. The business was also facing several assessments and fines from the tax authorities.
At Tact we often help our clients get their overdue accounting work up to date and defeat their “accounting dragons” in the process. This involves a combination of work planning, utilizing accounting automation and communicating with the tax authorities. Below I share five tips that can help your business overcome its accounting dragons.
1. Stay Positive and Don’t Lose Hope!
I’d like to encourage you to stay positive and not lose hope! Facing the monstrous challenge (pun intended) of completing overdue accounting work and dealing with the tax authorities can be daunting! However it’s important to know that many business owners like yourself have successfully faced and defeated their own accounting dragons! In this article I share with you general advice based on our professional experience helping small businesses sort out their accounting administrations. I encourage you to seek custom advice for your specific circumstances from a trustworthy accountant or tax advisor.
2. Communicate with the Tax Authorities
As business owners and entrepreneurs, we’ve all known the daunting feeling of opening and reading letters from the tax authorities! If your accounting is not up to date, you’ll probably receive an assessment or penalty fines from the tax authorities. Whatever you do, please don’t ignore these letters! Instead I would advise you to communicate with the tax authorities; either directly or via your tax advisor. Let them know that you’re getting your administration up to date and ask them for a deadline extension. This lets the tax authorities know that your business is serious about meeting its tax filing obligations. It may also avoid the tax authorities taking more severe measures against your business like placing liens on your bank accounts or auctioning your business assets.
3. Create an Accounting Backlog Team
If your business is several years behind on its accounting work, you are faced with the challenge of getting the overdue backlog work completed while keeping the current year’s work up to date. In our experience, it can be rather challenging for the same bookkeepers or accountants to handle both of these tasks simultaneously. If you attempt to deal with the backlog work first, by the time it’s completed the current year’s work has also fallen behind. In our experience it is more effective to have an accounting team handling the current year’s work and a designated backlog team tackling the overdue work. This approach has proven to be very effective in our experience.
4. Leverage Accounting Automation
Completing overdue accounting work sometimes involves processing hundreds or thousands of bank transactions and invoices. To get the work done as efficiently as possible requires the use of automation. For example, instead of manually entering bank transactions one by one, it is more efficient to upload all bank transactions using a CSV file. Additionally, certain accounting applications like QBO allows you to create bank rules to automatically categorise transactions. Based on the amount or description of a bank transaction the system would then automatically post it to the right expense or income account. Both of these automation steps save a tremendous amount of time completing backlog accounting work.
5. Outsource Accounting Work
Finally, I understand that not every small business or entrepreneur has the time or internal staff to complete all of the above on their own! One effective approach is to simply have a reputable and trustworthy accounting firm support you with the entire process of getting and keeping your accounting work up to date. This is likely to be cheaper and take less time than doing it all on your own. Perhaps more importantly, outsourcing your accounting work will provide you with peace of mind and the ability to focus on more important areas of your business.
