When does accounting start to slow down a company's growth?

As a company grows, not only does turnover increase. The number of invoices, employees, bank accounts, projects, warehouse operations, and management requests for increasingly detailed information also increase.

At first, accounting can often be organized relatively simply: documents are sent via email, data is entered manually, and financial results are reviewed once a month. However, there comes a time when the current system no longer meets the needs of the company.

The problem is usually not that the accounting is done incorrectly. The problem is that it is organized the same way it was when the company was much smaller.

1. Management reports are available too late

If the company's management only receives the previous month's results at the end of the following month, the information is no longer particularly useful for making operational decisions.

The driver should see in a timely manner:

• turnover and profit;

• cost changes;

• accounts receivable;

• cash flow;

• results by projects, departments or company lines of business.

Accounting data is not just for preparing tax returns. Properly organized, it becomes a management tool for a company.

2. The company is profitable but short of cash

A profit on a financial statement does not always mean that there is enough money in a company's bank account.

Cash flow problems can be caused by:

• slow customer payments;

• too much inventory;

• significant advance payments;

• unplanned tax payments;

• rapid increase in employees or costs;

• insufficiently controlled company expenses.

If company management is regularly surprised by an upcoming tax payment or account balance, more detailed cash flow control is needed.

3. Data is entered manually multiple times

Medium-sized companies often use several systems: an accounting program, a project management system, an online store, warehouse accounting, a payroll system, and online banking.

If data is moved between these systems manually, several risks arise:

• errors;

• data duplication;

• unnecessary consumption of employees' time;

• different numbers in different reports;

• difficulty in tracing the origin of data.

Automation doesn't have to start with an expensive and complex IT project. Sometimes, importing bank data, structured invoicing, or automatically transferring sales data to an accounting system is enough.

4. No one knows exactly the company's profit by project

A company as a whole may operate at a profit, even though individual clients, projects, or services are causing losses.

If costs are not correctly distributed across projects or departments, management cannot objectively assess:

• which customers are profitable;

• which services generate the most profit;

• where costs are rising fastest;

• where prices should be changed;

• which projects should be abandoned.

Such analysis usually cannot be obtained from a standard profit and loss statement alone. Accounting records tailored to the needs of the company are required.

5. Accounting depends on one person

If only one employee knows how to prepare payroll, submit returns, reconcile accounts, and prepare management reports, the company faces a significant business continuity risk.

Vacation, illness, or employee departure can result in:

• missed deadlines;

• unavailable information;

• difficulty finding documents;

• a long process of knowledge transfer;

• additional costs for correcting errors.

The most important accounting processes must be documented, traceable and auditable.

6. Preparing the annual report becomes an emergency project

The annual report and audit should not take months of searching for documents and correcting data.

If you regularly discover inconsistent accounts, missing documents, or unexplained balances at the end of the year, it means that the problems did not arise during the preparation of the annual report. They have accumulated throughout the year.

High-quality month-end closing significantly reduces annual reporting and audit costs.

7. An accountant can tell you what happened, but doesn't help you understand why

Accounting traditionally analyzes the past. But a growing company also needs explanation.

For example:

• why did gross profit decrease;

• why did administration costs increase;

• why a particular project has lower profitability;

• how will cash flow develop in the coming months;

• how the planned increase in staff will affect the company's results.

A good finance function is not limited to producing accurate numbers. It helps management understand and use those numbers.

Accounting should grow with the company

The average company doesn't necessarily need a large internal finance department. But it does need clear processes, timely data, and accountability for results.

Properly organized outsourced accounting can combine:

• daily accounting records;

• preparation of tax returns;

• salary calculation;

• management reports;

• cash flow control;

• documentation prepared for the audit;

• data import and system integration;

• financial consulting for management.

Confidentum helps companies streamline their accounting processes so that management receives not only correct declarations, but also timely and understandable financial information.

If your company has outgrown its current accounting system, you probably don't need to work harder. You just need to organize your processes differently.