Why should you invest in a good accounting and compliance team?
Compliance in business is challenging because companies often pay less attention to it. It's not until the year-end that companies realize they have failed in achieving and updating accounting and compliance reporting.
Unlike large corporates, small businesses do not invest in accounting and compliance teams. They carry on their accounting by relying on manual entry systems that provide nothing fruitful apart from increasing the cost of operations.
But in reality, accountants execute more activities than bookkeeping and tax filing. They are responsible for maintaining a healthy financial culture in the company with technical advice and opinions.
Why is accounting important to your business?
Accounting in business plays a vital role in shaping the company's financial blueprint. Through accounting, companies log in their daily income and expenses, invoices, purchase bills, inventory levels, and wages that help assess their financial capabilities.
A company's accounting has the following pillars:
• Profit and Loss statements
The figures mentioned in the above documents help make informed decisions related to the company's future plans and strategies. Additionally, these reports are crucial for investors, banks, and other stakeholders to analyze the company's financial performance.
With timely auditing of the books of accounts, the accounting department ensures the accounting standards are being followed consistently for all the entries.
The accountants help identify the system's pain points, provide a solution for the unoptimized areas, and guide in all aspects of financial management.
With deep knowledge of accounting and finance, they suggest cost-cutting ways and improve the business's cash cycle.
What is the purpose of having a compliance team?
Compliance in business ensures that companies follow and adhere to the internal and external rules of conduct. The internal controls include policies and regulations, whereas external include tax and legal obligations.
Compliance reporting is one of the business's ethical codes of conduct that shows how well they incorporate and follow the rules applicable to their business entity.
They depict a company's seriousness in promoting an ethical culture and preventing any forms of corporate misconduct.
A compliance team assists in adhering to the legal obligations for the employees' safety, health, and overall welfare.
They keep the business owners informed about the changes in the regulatory policies and how they can incorporate them into their corporate culture.
The team helps the company prepare for compliance audits conducted by the country's financial body.
The compliance officer reviews the business's code of conduct, checks the obedience rate of the rules, and counsels them on how to incorporate the policies and mitigate penalties.
Six ways an accounting team can help your business growth
Accounting is the "language of a business." Business owners cannot convey the correct position of the business without mentioning the numbers and figures.
An accounting team is an indispensable part of your business's prosperity and stability.
Here are six highlights that prove the importance of an accounting department for a company:-
1. Ensure to stay within the law and order
Business owners cannot practically take care of all the regulatory requirements. The accounting department has the expertise and required knowledge regarding the legal obligations of a business.
They can guide other departments on how to stay within the lines of law and the activities that are permissible and non-permissible for an employee.
The accountants duly calculate the tax returns, file them on the tax portal, look for exemptions and deductions, and maintain the receipt for final auditing.
2. Decision making
Making collaborative decisions by consulting with your accounting team helps improve their quality and reliability. Based on the financial reports and analysis, the accountants can guide the business owners if the decision is a viable option or not.
The financial statements present an accurate picture of the company's current and future revenue-generating capacity. If the accountants find out the current position might not help support the strategy, it's best to avoid it for the time being.
3. Helps in budgeting and planning
The accounts department plays a crucial role in guiding the budgeting process. According to the availability of the funds, the accounting team helps in framing the primary and departmental budgets.
Through the help of financial statements and reports, business owners try to comprehend the effectiveness of the budget and look if any significant changes are required in it.
The reports show how well the departments utilized the amount allocated and allow to calculate if they are under-budgeted or over-budgeted.
4. Saves time
Having a professional and competent accounts team allows business owners to focus on the organizational goals and objectives.
They would spend their time making strategic decisions rather than struggling to manage finances, leading to poor financial management.
A qualified team enables you to unload your burden and focus on productive areas of the company. They assist you in making the right choices by acting as a financial advisor and allow you to direct your attention towards business goals.
5. Plans for the future
To increase the rationality of future plans, companies rely on past financial information and knowledge to analyze the performance of previously adopted strategies. They try to understand the efficiency of these plans in driving business growth and decisions.
Based on the reasoning of the past planning process, the accounts team guides in making knowledgeable decisions for the future.
6. Evaluate business performance
Your accounting numbers indicate the financial health of your company. These figures show your past performance and help you evaluate future predictions.
Business owners learn their gross margins, month-on-month growth, return on capital, total debt, profitability, liquidity, and more business performance standards through accounting.
Five reasons why compliance is important in business
Compliance management is the process of maintaining a company's industrial, contractual, and regulatory obligations. It includes developing compliance policies, internal auditing, policy tracking and monitoring, compliance reporting, and consumer complaint response.
Due to their limited knowledge, the company's existing workforce might fail to account for and conform to applicable laws, standards, and contractual obligations. This might result in heavy penalties and losses to the organization.
To prevent this, companies need to create a compliance department that will monitor all the regulatory functions.
Mentioned below are the reasons why compliance is an essential part of a business:-
1. Manage risks
Managing risk is another term for corporate compliance.
By following business compliance, companies assess their risks and uncertainties. They evaluate the potential damage companies can face in running their business operations.
To mitigate the risks from your organization, the compliance department needs to review audits, address customer complaints, employee claims, development in industry-related policies, and adhere to the latest legal framework.
2. Train your employees
Creating a compliance program is futile if the employees do not adhere to it.
Employees need to be trained regarding the policies and procedures, be educated about handling customer complaints, and define strictly prohibited actions in order to incorporate an effective corporate compliance program.
3. Have organized data
With the help of compliance, companies create accurate data sets that help in policy formation and drive the business planning process.
With prior knowledge of the legal rules and regulations, companies plan their activities according to the compliance requirements.
4. Avoid unwanted errors
A beneficial compliance program ensures the employees work with high precision by reducing errors. Working according to the set procedures and methods diminishes the possibilities or mistakes and prevents duplicate efforts.
5. Helps in retaining talent and making better employee engagement
By following employee-related compliance in business, managers increase employee satisfaction by protecting their rights and dealing with their issues.
Establishing a strict code of conduct and policy enforcement can promote a healthy organizational climate and increase employee engagement.