How to turn accounting from an expense into an investment
Accounting is an investment in your company, not just an expense
The right approach to accounting will improve your ROI
Accounting software can also improve your ROI by providing data-driven insights into operations
Accounting software saves money by automating processes
You should also consider the value of outsourcing versus hiring an in-house accounting team
Contractors have to deal with multiple challenges. In addition to planning their projects, hiring quality staff, working around the weather, and focusing on client satisfaction, they also have to track the profitability of their projects. This requires a strong commitment to accounting.
As a contractor, you need to be able to track your revenue and expenses as well as capital assets and long-term liabilities. On top of that, you have to break down your records to track the costs of each project, and you must ensure that you’re following generally accepted accounting principles (GAAP) in relation to revenue recognition.
With so many moving parts, accounting for contractors can be a major expense. At the same time, the right accounting solution can be an investment in your company. To help ensure that accounting is an investment and not just an extra cost, this guide explains how the right approach can provide accounting ROI for your contracting business.
Saving time on data entry
Traditionally, accountants and bookkeepers had to spend a lot of time on data entry, costing businesses money in payroll and employee expenses. Now, if you invest in accounting software, your business can rely on the software to automatically reconcile and update a variety of financial records, and you save money on manual data entry expenses.
Making data useful
Accounting is about more than just tracking numbers — it’s about making numbers useful. Once the numbers are in the system, your leadership team can leverage that data to guide their decision-making.
For example, accountants can help track the profitability of different products and projects. They may even be able to assess different elements of employee performance using accounting data. Guided by this data, you can make the most effective decisions for your business.
Greater visibility into operations
A cloud-based accounting system offers a centralized repository of records that anyone in the organization with the proper privileges can see. This keeps everyone on the same page and gives you greater visibility into your operations.
Additionally, accounting software can automatically create the reports you need to have visibility over your operations. In contrast, manually creating reports from Excel spreadsheets is a time-consuming, expensive process.
Manual accounting data entry leads to a lot of potential errors. Automation reduces errors, which saves time and money. A simple error can cost companies millions of dollars, but even if you’re not dealing with errors of this magnitude, you will have more confidence in your numbers if you know that you have taken steps to reduce errors due to manual entry.
If your customers aren’t paying you in a timely fashion, you may face cash flow disruptions and not have enough working capital to meet your needs. Timely payments require timely invoicing, and accounting software streamlines and optimizes this process.
On average businesses spend about $4 per invoice, but the cost ranges from $2 to $9. Businesses with particularly inefficient processes may pay even more per invoice.
To keep your costs as low as possible, you need an invoicing solution that automatically creates and sends invoices and recognizes payments as they are received. You can also automate reminders and late notices. This saves time for employees, but it also helps to reduce your unpaid receivables rate, which directly improves your accounting ROI.
Outsourcing versus in-house accounting
Investing in the right software is not the only factor to consider when thinking about the return on investment on accounting activities. You may also want to think about the ROI of outsourcing versus in-house accounting.
When you outsource your accounting, you only pay for the services you need, and you can access expert-level services that you wouldn’t necessarily be able to get with an in-house team. For example, you could hire a company to do your bookkeeping and tax prep when you first get started, but as needed, you may turn to their Chief Financial Officer (CFO) services to help guide the financial direction of your company.
In contrast, when you have an internal team, you are limited by their individual abilities. You also have to pay their salaries. A tax accountant earns a median salary between $54,000 and $82,000, while a financial reporting accountant has a median salary of nearly $100,000. In addition to salary, you have to cover payroll taxes, benefits, supplies, office space, and other employee-related expenses.
When you work with a team from outside your company, you improve your accounting ROI by only paying for what you need. You can also scale easily as needed, without incurring additional costs related to recruiting and onboarding.
Accounting is a must for contractors. You must track the numbers to stay compliant with income reporting and tax payment regulations, but beyond that, you need to understand the numbers so you get a sense of how your business is doing.
Contact Franco Blueprint for help