High-tech accounting systems and technology tools help businesses improve efficiency, reduce errors, save money and increase revenue. Therefore, continuing to waste time, man-hours, and potential on manual accounting systems is an expensive mistake.
I know what you’re thinking, “I want to avoid new expenses in the form of software costs and subscription fees.” But the money you think you’re saving is actually costing you more money, time, and unforeseen, long-term problems.
1. inefficient use of employee time
If your employees are spending time on inefficient accounting and bookkeeping tasks (e.g., retrieving data, completing paperwork, and entering data), you are spending a lot of money on tasks that could be done better and faster with relatively inexpensive technology.
By reducing the time, it takes employees to complete their tasks, as well as the number of employees needed to complete each task, automation results in more hours spent on work that increases the bottom line. You’re missing out on the potential revenue you could be generating by making smart use of your employees’ talents and time.
Human capital is your company’s asset with the greatest potential to increase revenue. Your employees can focus on high-level work that drives your business forward.
2. inaccurate time tracking
Does your company still use old-fashioned time cards? Is your HR department still manually recording employee time, paid time off, and PTO usage? How much time do they spend on these tasks and how much time do they spend responding to inquiries about PTO accruals? How much are you paying HR employees to complete these tasks?
Think of these expenses as a loss.
There are accounting system integrations you can use to automate time tracking and accrual/utilization of benefits in your organization. One of our favorites is TSheets. This can free up the minds in your HR department for more goal-oriented tasks, such as ideas for performance bonuses, recognition, and rewards for employees.
So, not only are outdated time and attendance systems costing you money, they’re also responsible for causing your company to miss out on potential growth through a more robust HR strategy.
This is especially important for service businesses that make their money on employee time. To build a highly profitable service business, you need a time and attendance system that integrates with payroll, scheduling, and leave management. This integration allows them to perform true job costing, optimize their pricing, and ultimately make more money.
3. unreliable data
Manual accounting processes are inaccurate, slow, and unreliable. As a result, it’s impossible for you to know if you can rely on the accuracy of your company’s numbers or if the data you’re looking at is up-to-date.
An inefficient accounting process with data that doesn’t appear to be accurate and doesn’t provide actionable reports that help you make decisions is useless.
Manual accounting processes cost you money in the long run – in addition to the inefficient processes eating up valuable staff time, but also with additional (unplanned) costs incurred by your CPA – to catch up and clean up the books, resolve discrepancies and fix errors. Manual processes are not as accurate as automated processes and are not able to be translated into actionable reports that help management make data-driven decisions.
If you find that you can’t rely on or get your processes, numbers, and financial reports in a timely and consistent manner, then you have a major problem with your existing accounting processes.
You can’t use this type of data to set goals or track your progress. As a result, your business lacks direction and a consistent motivational structure, and your bottom line will suffer.
4. potential for fraud
Regardless of how many controls and reconciliations you have in place, manual accounting and billing processes have security vulnerabilities that expose your organization to internal and external fraud risks. You can’t just ignore these risks and hope they never happen to you.
It is estimated that up to 30% of business failures are due to fraud.
While losses negatively impact all businesses, smaller businesses are not as well equipped to withstand significant losses. Generally, the smaller a business is, the higher the risk of fraud. In fact, businesses with fewer than 100 employees suffer an average loss of $200,000 due to fraud – nearly twice as much as businesses with more than 100 employees.
Automated accounting and billing systems are a good place to start because they have internal controls, built-in checks, and balances that improve security to minimize the risk of fraud, making it much more difficult for individuals to exploit your system.
In addition, segregation of duties, i.e., a second instance, is another important factor in reducing or eliminating the risk of fraud.
5. poorly timed invoices
Paying your invoices on time is important to your company’s reputation and credit rating, and also saves you from unnecessary costs in the form of late fees or interest. In addition, you can take advantage of early payment discounts and even save money by paying certain invoices before they are due whenever possible.
Without automating these processes, juggling all of your company’s payables and timing them perfectly/professionally is a task that a single employee cannot handle full time. If you hire a full-time employee to manage your payables, you will lose much more in overhead than if you take advantage of a system like Bill.com that automatically syncs your payables with QuickBooks.
The Wall Street Journal estimates that the average small business spends $12 to pay an invoice. Using Bill.com to pay bills electronically can reduce the cost of paying an invoice to about $1.50.
6. sloppy invoicing
You will see similar cost savings in your collection processes. Similar costs are incurred in a manually operated accounts receivable department. In addition, perfectly timed invoicing is a complicated task for an employee to complete efficiently.
If you don’t automate collections, you risk delays and inconsistencies in collecting unpaid invoices, don’t collect late fees to prevent future delays in payment, and are constantly operating with limited cash flow due to high days’ sales outstanding.
With automated invoicing and electronic payment solutions, you get paid sooner, save staff time, and most importantly, improve your company’s cash flow.
7. cumbersome expense management
Gone are the days of recording expenses with paper spreadsheets, manual approvals, and manual expense categorization. Manual expense management leaves room for addition/subtraction errors and fraud. First and foremost, losses occur due to the enormous amount of time required to manage and organize all the paperwork associated with this task.
Instead of continuing to manage expenses manually, streamline the task of expense submission, documentation, and approval with an app like Expensify.
Expensify advertises that its system is 83% faster than having employees fill out expense reports manually.
You’ll still keep an eye on the money leaving your company, but much less time will be spent reading through receipts and spreadsheets, cutting reimbursement checks, and you’ll find it much easier to approve expenses.
8. tax reporting errors
Manually managing processes like your sales tax and 1099 reporting requires a large amount of staff time. Not only do employees have to take care of these tax reports, but they also have to keep up with ever-changing tax laws and regulations at the local and federal levels.
Automating these functions in your organization not only provides protection against inaccuracies and non-compliance but also saves time.
9. Poorly Timed Hiring
At some point, every business owner has asked themselves, “When should I hire more employees?”
Manual accounting systems make it nearly impossible to predict employee retention. Or business growth, making it extremely difficult to determine the right time to hire.
Does your accounting system allow you to access management reports that can help you predict? When you need to expand a particular department and how soon your new employees need to be ready to go?
If not, you’re missing out on the potential to smooth out your company’s growth. And save on the cost of poorly timed new hires. If you are able to hire new employees in a timely manner, you will avoid unnecessary costs associated with increasing overhead. Before it is necessary and delayed production due to a workforce that is too thin.
10. poor cash flow forecast
Businesses fail for 3 reasons: Cash flow, cash flow, and cash flow.
With manual accounting systems, you will struggle to get a clear picture of your company’s current cash flow forecast. As a result, you’ll struggle to identify challenges before they arise. And you’ll miss the opportunity to make data-driven decisions that will help you overcome future cash flow challenges.
With automated accounting and financial reporting systems. You always have the most accurate view of the current state of cash flow in your business. So you can make the strategic decisions now to secure the future of your business.
Combine team and technology to get the most value
It may seem like this type of automation is meant to replace your employees, but that’s simply not true.
Successfully implementing automated tools and streamlined accounting processes. Simply frees up valuable time from your staff so they can focus on higher-value tasks. Therefore, when it comes to the cost of employee time, you’ll see a much higher ROI. When you invest in robust, integrated tools to automate your back office.