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SMB Online Accounting: Challenges and Opportunities


Proper financial accounting management is critical to any successful small to mid-size business, but this function is often misunderstood when it comes to budgeting and aligning resources and capabilities. For example, although a small business owner could theoretically find the time to take care of their own accounting needs while running every other aspect of their company, this does not mean that they have the necessary knowledge or skills to avoid costly mistakes.

Many SMBs consider part-time freelance support, expanded services from their accountant or creating an internal accounting department to be their only options for addressing their accounting needs. However, each of these options is not necessarily the ideal solution for growing and established SMBs. SMBs with revenues of $1 million are greater are likely to have more complex needs than a freelance bookkeeper can handle skillfully. Utilizing the company’s CPA may seem proper, but often the hourly rates are cost-prohibitive and attention to detail ebbs and flows with tax season commitments. Finally, creating an internal department is especially rife with potential problems from lack of training oversight to opening the door to fraud and theft. However, as cloud and online accounting solutions have become commonplace over the past few years, many SMB owners have begun to make the switch to outsource their accounting services alongside their accounting applications.

A recent report compiled by the research firm Ardent Partners and sponsored by business travel & expense tracking software Concur looked closely at the disadvantages and opportunities that all SMB owners have in the accounting technology space, and shed some light on the importance of shifting as many accounting processes and procedures to outside services and cloud-based applications to help prevent major errors that could end up destroying your bottom line. The information in this report also took a close look at the overall economic impact of businesses that bring in approximately $1 million to $5 million annually and ultimately help draw the conclusions that addressing SMB needs with cloud accounting and online services may be a game changer for the lifeline of SMBs everywhere.

How Vital Are SMBs to the Economy?

The economy would collapse without SMBs to help hold it up, but owners are not giving themselves the right tools to survive. Ardent Partners discovered that only 33 percent of all SMBs that are founded in 2015 will still be operational in 2025, yet all of the SMBs in the U.S. combined pump an astounding $5.5 trillion into the economy each year.

These statistics make it clear that there is excellent potential for SMBs, but owners need to take full advantage of every opportunity that is available to survive the early years and grow to a sustainable level. Most SMBs that fail within the first decade end up suffering financially due to issues with the company's infrastructure and cash flow management. This proves that financial accounting must be a main focus for businesses to have sustainable growth and success. Therefore, unless you truly have the time, energy, knowledge and resources to dedicate to accounting on-site, you need to carefully consider proven alternatives that can help keep your business afloat.

What Are the Biggest Challenges Facing SMB Owners?

Accurate bookkeeping is a major challenge for any business, but this problem is typically exacerbated due to the limited budget of a smaller company. Employees of SMBs who responded to Ardent Partners' surveys also indicated that they are frustrated by problems such as slow or inaccurate expense management, a lack of automation for invoicing and minimal flexibility with travel management. Not all of these categories are often thought of as falling under accounting issues, but it is important to note that every type of expenditure impacts your budget and accounting process.

Companies with a good expense management system in place use automated processes and directly connect their expense management into their accounting practices. According to survey respondents, at least 70 percent of SMB owners are relying on outdated and inaccurate expense management tools such as paper or computer spreadsheets, corporate cards and paper receipts and report to help them track this vital aspect of their budget.

What Are the Biggest Opportunities Available for SMB Owners?

Instead of using unreliable expense management options, SMB owners can get their expenses under control by making the switch to automated processes. Studies indicate that this will reduce processing time by 35 percent, and it will also provide a stunning 75 percent cost reduction for expense claim transactions. As an added bonus, you can still receive all of these perks while outsourcing your accounting to an online company because a paperless environment is ideally suited for online accounting services integration. In addition, automated expense management can be synced to the rest of your accounting programs, from QuickBooks to time tracking applications.

Travel management also gives owners the opportunity to minimize their financial losses by shutting the door on expensive bookings. Although employees have made it clear that they value flexibility while traveling, you can save a lot of money by preventing people from booking flights and hotel rooms that are outside of your travel policy.

Shockingly, as many as 50 percent of all business travel related hotel rooms are booked for a higher price than necessary, but owners often fail to discover these discrepancies because they do not have a strong accounting team and travel management guidelines in place. Leveraging cloud-based travel and expense management software helps align the processors with the expenses and creates a seamless review and approval process to eliminate the risk of overspending and lack of oversight.

Automated invoicing is another huge opportunity to save money, and the majority of SMB owners have started taking advantage of this option. Research indicates that choosing this route can reduce the expenses associated with invoice processing by as much as 70 percent, so it is no wonder that approximately 70 percent of all SMBs use invoicing software. However, anyone who is not currently utilizing this time and money saver should definitely make the switch. It will help you with better financial management, and it will provide more accurate data for your accountants, regardless of whether you outsource this vital function or keep it in-house.

Getting the Most Out of Your Budget

Ultimately, every owner of a small or mid-sized business strives to achieve the highest profit margin possible. This is a great goal, but it can cause some owners to take a short-sighted and narrow-minded approach to certain business functions. For example, the idea that cutting corners on accounting expenses will not affect your end results is likely to backfire. In fact, choosing to opt for the cheapest or easiest accounting solution is probably going to make knowing things like your exact profit margin a fairly murky number at best.

When making a decision about your accounting needs, it is best to look at how much time and energy you could save by outsourcing, and you also need to consider how many mistakes and unexpected expenses can be eliminated by taking advantage of this opportunity. Additionally, you will never need to worry about employees attempting to alter records in order to get away with booking a lavish hotel room or making a big mistake because an outsourced company has no personal stake in misrepresenting data to protect themselves.

The reality is that SMBs are big enough to need a dedicated staff, but they are also small enough that the accounting department could slip through the cracks. Fortunately, you can improve your financial data and receive the benefits of controller oversight by taking your accounting off-site and online. This will also enable you and your staff members to focus more closely on every other aspect of running a successful business—and help you grow further, faster and more efficiently.

Hidden Costs of Self-Managed Bookkeeping

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