In small businesses, effective financial management can be the difference between growth and stagnation. Historically, accounts payable was often considered a basic part of operations. However, this perspective has dramatically shifted with the technological breakthroughs in accounting software. 

 

Now, you have the opportunity to harness accounts payable software not only to automate and streamline your AP processes but also to enhance your organization’s financial health significantly. This article will shed light on accounts payable software (AP software) and nine benefits for modern businesses.

 

1. Streamlined Operations

 

If you have ever felt bogged down by the never-ending pile of open invoices waiting for your approval, you are not alone. But with accounts payable software, such concerns become a thing of the past. This software simplifies and automates processes, ensuring you spend less time on manual tasks. By digitizing your AP workflow, you will streamline the entire process of managing invoices from receipt to payment. 

 

2. Cost Savings

 

Accounting errors, even minor ones, can accumulate significant costs over time. With software handling the accounts payable processes, these mistakes can be drastically reduced. Beyond that, the software eliminates the need for physical storage and manual paperwork, cutting down operational expenses.

 

3. Improve Internal Controls

 

Accounts payable software helps you strengthen your financial controls. The software can set up rules for approving invoices to ensure payments go through only after certain criteria have been met. It can also include several approval steps, ensuring each payment is double-checked and signed off by different individuals or management levels before processing.

 

4. Improved Cash Flow Management

 

For small business owners, knowing your financial position at all times is mandatory. AP software gives a broad snapshot of all your pending bills, allowing you to stay on top of payments and avoid unnecessary late fees. With such clarity, managing and projecting your cash flow becomes straightforward and stress-free.

 

5. Integrated Financial Data

 

As your business grows, the variety of financial tools you rely on also increases. Accounts payable software can be part of a central platform, effortlessly integrating with other essential tools like payroll, cash flow management, and even direct connections with your bank. This consolidated approach gives you a comprehensive view of your financial landscape in one location, saving you time. 

 

6. Advanced Security Features

 

In our digital-centric world, ensuring security is non-negotiable. No entrepreneur wants to experience the nightmare of a financial data breach. AP software is fortified with advanced security measures. For instance, two-factor authentication, encryption protocols, and secure cloud storage are some features that guard against potential fraud and safely house all your financial data.

 

7. Enhance Financial Reporting

 

Having all your accounts payable data in a digital and unified platform transforms the financial reporting process. Instead of sifting through piles of paperwork or waiting for Excel files to load, you can swiftly generate precise financial reports. These insights equip business leaders with the necessary details to make well-informed and strategic decisions, driving the company toward its financial goals.

 

8. Better Vendor Relationships

 

Trust is the cornerstone of business partnerships. Ensuring vendors are paid promptly fosters more reliable relationships. AP software incorporates safeguards like timely alerts to prevent any oversights. Additionally, it maintains a clear ledger of all transactions, streamlining communications with vendors.

 

9. Scalability for Growing Businesses

 

Every entrepreneur dreams of business growth. But with growth comes increased transactions and complexities. AP software platforms can cater to varying transaction volumes. The software adapts whether you are dealing with a hundred or a thousand.

 

Another consideration is compatibility or additional features. Will your AP software also work for Accounts Receivable (AR) functions like invoicing and payment terms? As you prepare to onboard employees, can the software also manage payroll? What about more advanced accounting, reporting, and cash flow features? It’s important that your AP software either integrates with other platforms or is software like FINSYNC that already includes all these features.

 

Looking Ahead

 

In conclusion, accounts payable might seem like just another task in the vast world of business management. However, it can be transformed from a mundane chore to a strategic asset with the right tools. Adopting accounts payable software streamlines the AP process, reduces errors, and offers real-time insights into a company’s finances. This transparency boosts cash management and informed decision-making.

 

Moreover, using software for accounting functions ensures consistent data across departments, strengthening operations. AP automation is a strategic shift towards efficient, reliable, and value-added financial management. Simply put, adopting accounts payable software lays the foundation for a more intelligent, streamlined, and growth-oriented future for your business.

 

How FINSYNC Can Help

 

FINSYNC allows you to run your business on One Platform. You can send and receive payments, process payroll, automate accounting, and manage cash flow. To learn more about how we can help your business start, scale, and succeed, contact us today.

 

In the constantly shifting landscape of the accounting industry, accountants face a dual challenge: staying abreast of regulatory changes while leveraging evolving technologies. These changes can be unpredictable but almost always significant. With the right approach, these hurdles can become stepping stones to a more resilient accounting practice.

 

In this article, we will explore five strategies that can help you navigate these shifts, boost productivity, and solidify your firm’s standing in the market.

 

 

1. Understand Current Industry Trends

 

The wave of digital technology, such as digital invoicing, has revolutionized the accounting field, highlighting the importance of integrating policies into your firm. This adoption of tech-oriented solutions minimizes manual errors and refines operational processes, fostering improved decision-making capabilities. 

 

Cloud-based systems have emerged as essential tools in the accounting landscape, providing the convenience of accessing financial data in real time from anywhere. Artificial Intelligence is still in the early stages of its application within accounting for enhancing automation and boosting analytical capabilities. But it is coming, and advancements are poised to drive the next phase of efficiency and innovation.

 

 

2. Explore Additional Services

 

Differentiation has always been the key to standing out in a crowded market. Whether it’s specializing in a particular industry or offering services beyond traditional accounting, differentiation can create new revenue streams and increase your firm’s appeal to a targeted client base.

 

Here are some examples of how accountants can create new revenue streams and heighten their appeal to a specific client base:

 

Advisory Services 

While traditional accounting roles are important, expanding into advisory services can significantly boost your revenue. This can include financial planning, business consulting, risk management, or succession planning services. Such advisory roles position your firm as a strategic partner to clients, not just a service provider.

 

Industry Specialization

Specializing in a particular industry, such as healthcare, technology, or non-profit organizations, can differentiate your firm. Your specialized knowledge will add value to clients within these sectors, as you can offer tailored advice and insights specific to their industry.

 

Technology Consulting

With the surge in digital transformation, many businesses struggle to choose and implement the right accounting software. Offering technology consulting services or becoming a certified partner for popular accounting software platforms like FINSYNC can open a new revenue stream for your firm.

 

Outsourced CFO Services

Smaller businesses might not have the budget for a full-time CFO but still need the expertise. By offering outsourced CFO services, your firm can provide strategic financial management to smaller clients without them having to bear the cost of a full-time hire.

 

Additionally, focus on building strong relationships with your clients. Regular communication and providing tailored financial advice can enhance client retention. 

 

 

3. Boost Efficiency and Productivity

 

Efficiency is paramount for accountants. Effective time management not only increases productivity but also reduces stress. Incorporate tech tools to automate routine tasks, freeing up time for more complex, value-added work.

 

Continuous learning is also a critical aspect. Regular professional development can help you stay ahead of industry changes while maintaining productivity. 

 

 

4. Stay Informed of Regulatory Changes and Compliance

 

Regulatory changes can present both a challenge and an opportunity. By staying updated, you can guide your clients through changes, cementing your role as their trusted advisor. 

 

By staying informed about the latest developments and rules, you are equipped to guide your clients through these changes. This expertise not only helps your clients navigate complex regulatory landscapes but also strengthens your relationship with them as they come to rely on your insights and counsel.

 

Additionally, consider integrating a robust compliance management system. Such a system can help ensure that your firm adheres to the latest standards and guidelines, preventing expensive non-compliance penalties. A well-implemented compliance system streamlines processes, providing clear protocols and actions in response to changes in regulation. 

 

 

5. Leverage Technology

 

Familiarize yourself with industry-standard accounting software and applications. Tools like FINSYNC can optimize your practice and provide deeper insights into financial data, enhancing your forecasting and strategic planning capabilities.

 

Don’t overlook the importance of cybersecurity. Protecting your clients’ sensitive information is not only ethical but also crucial for your firm’s reputation. Overall, a successful digital transformation involves strategic planning, adequate training, and embracing change in this ever-evolving market.

 

 

Looking Ahead

 

The accounting industry’s future is one of continual adaptation and innovation. By understanding and incorporating industry trends, focusing on client relationships, ensuring regulatory compliance, and leveraging technology, you can boost your firm’s value and ensure sustainable growth. We encourage you to apply these strategies, secure your firm’s future, and provide outstanding service to your clients.

 

 

FINSYNC Accounting Partner Program

 

We understand accounting professionals’ critical role in a business’s success. This is why we have designed the FINSYNC Accounting Partner Program. Where a dedicated Account Manager will help you achieve your firm’s goals. FINSYNC’s platform consolidates all financial operations into an all-in-one system, ensuring smooth financial management while connecting businesses with the right financial experts. 

As we venture further into the digital age, Artificial Intelligence (AI) continues to reshape various industries, with accounting and bookkeeping being no exception. Over the next five years, AI is not just set to revolutionize these fields, but it also promises to serve as an ally to accounting professionals, enhancing their efficiency, refining their decision-making capabilities, and transforming risk management.

 

Transaction Management

In the near future, AI-powered systems will likely manage the bulk of transactional data, tackling reconciliations and allowing bookkeepers to channel their expertise into analysis and strategy. 

 

Financial Forecasting

AI can also enhance the accuracy of financial forecasting. By studying and understanding historical data patterns, AI can help predict future trends with remarkable accuracy. As this technology becomes increasingly important for financial forecasting and budgeting, accountants will be empowered to make even more precise, data-backed decisions.

 

Auditing

The auditing process, often laborious and time-consuming, is another area that stands to benefit from AI. The ability to rapidly scan large datasets to identify anomalies and compliance issues will streamline the auditing process. As future AI systems hone their skills, they will become even better at detecting irregularities and potential fraud, enhancing the reliability and integrity of the auditing process.

 

Customer Service

Artificial Intelligence can potentially elevate customer service for accounting firms. AI-powered chatbots can respond to routine customer queries swiftly, providing immediate responses and ensuring 24/7 availability. Over the next few years, these digital assistants will evolve, delivering increasingly personalized and efficient customer interactions.

 

The Human Element

Despite these technological advancements, the human element within accounting and bookkeeping remains invaluable. AI is a powerful assistant designed to augment the capabilities of accountants, not replace them. As AI shoulders routine tasks, professionals can invest their time in more high-value work. This shift could lead to richer, more rewarding careers for accountants and bookkeepers and amplify the service they provide to their clients.

 

Summary

In conclusion, the next few years present an exciting era for the accounting and bookkeeping industry, with AI steering the transformation. This wave of innovation promises to amplify efficiency, sharpen decision-making, and facilitate a higher focus on strategic value. As we navigate this promising future, the key will be to view AI not as a replacement but rather as an empowering partner that complements human expertise.

 

FINSYNC Accounting Partner Program

We understand accounting professionals’ critical role in a business’s success. This is why we have designed the FINSYNC Accounting Partner Program. Where a dedicated Account Manager will help you achieve your firm’s goals. FINSYNC’s platform consolidates all financial operations into an all-in-one system, ensuring smooth financial management while connecting businesses with the right financial experts. 

 

Small business owners often grapple with the complexities of finances. Minimize stress and financial setbacks by exploring these 5 essential tips for small business accounting.

 

1. Keep Accurate Records

The first step to simplifying your business accounting is to keep accurate records. This means tracking all income and expenses, including proper documentation of invoices and receipts. Managing cash flow, preparing taxes, and making informed business decisions can be problematic without accurate records.

 

2. Separate Personal and Business Finances

Keeping business and personal accounts separate will drastically improve financial tracking and management for your company. One way to accomplish this is by opening a separate business bank account and obtaining a business credit card. Mixing personal and business finances may cause complications during tax season and result in inaccurate deductions. By separating expenses, you can accurately claim tax deductions for business-related costs, avoid discrepancies, and prevent costly penalties. 

 

3. Monitor Cash Flow

Proper cash flow management is paramount for the survival and growth of any business. You must closely monitor cash flow to ensure sufficient funds to cover expenses, pay employees, and invest in the growth of your business. 

 

By tracking cash flow closely, you can make informed decisions about hiring new staff, investing in new equipment, and marketing overhead.  Additionally, you can identify areas where you can reduce expenses, negotiate better payment terms with suppliers, or increase revenue streams.

 

4. Outsource When Necessary

Outsourcing financial tasks, like hiring an accountant or bookkeeper, or using once-per-year tax services, can help manage finances efficiently, freeing time and ensuring accuracy. Outsourced professionals can also offer valuable advice for effective financial management, potentially saving money long-term.

 

Understanding tax obligations, following IRS guidelines, and knowing available deductions are crucial for small business owners to avoid penalties and ensure compliance. Utilizing services like Liberty Tax, H&R Block, a bookkeeper, or an accountant can provide the necessary assistance as your business grows.

 

5. Use Software 

Finally, simplify your business finances with software like FINSYNC, designed for small businesses to create invoices, accept payments, track expenses, manage payroll, generate financial reports, and other tasks related to accounting and cash flow management.

 

Automation can significantly streamline your operations, reduce the risk of errors, and save time. One of the most significant benefits of automation is reducing time spent on data entry. Using software like FINSYNC, you can automatically import transactions from bank accounts and credit cards, eliminating tedious tasks like manually entering data into spreadsheets. 

 

Furthermore, automation revolutionizes invoicing by tracking open invoices and ensuring prompt payments. Automatic invoicing sends alerts to customers when payments are due or late fees are applied, enhancing overall efficiency.

 

Conclusion

Managing small business finances does not need to be overwhelming. By employing appropriate tools, strategies, and resources, accounting becomes more accessible, saving you valuable time and money. Furthermore, hiring qualified financial experts like accountants and business coaches can help you alleviate stress and enjoy peace of mind knowing that everything is being handled properly. 

 

Taking advantage of the latest technology can also make managing finances significantly easier, allowing you to focus on growing your business!

 

How FINSYNC Can Help

 

FINSYNC allows you to run your business on One Platform. You can send and receive payments, process payroll, automate accounting, and manage cash flow. To learn more about how we can help your business start, scale, and succeed, contact us today.

 

Your accounting firm likely encounters last-minute clients, which can cause disruption and stress to your team’s workflow. However, with the right strategies in place, you can effectively manage these clients and even turn them into opportunities to showcase your exceptional service. 

 

Here are four strategies to manage your last-minute clients in your firm:

 

1. Set Clear Expectations and Maintain Open Communication

Start by communicating with your clients upfront about potential risks and consequences, such as penalties or late fees, and explain the necessary steps to complete their request. This will help manage their expectations and prevent any surprises down the road. Maintain open communication throughout the process to ensure the client is aware of any updates or changes.

 

2. Prioritize Tasks and Allocate Resources Efficiently

Prioritize tasks based on urgency and complexity to allocate resources efficiently. Consider implementing a system to categorize and prioritize client requests, so your team can work through them in an organized manner. Identify team members with the appropriate expertise to handle specific tasks and avoid overloading them. If necessary, consider outsourcing to a qualified third-party provider.

 

3. Embrace Technology and Automation

Streamline your workflows and enhance efficiency by embracing technology and automation. Cloud-based accounting software and data analytics tools can help you work through tasks faster and more accurately. Investing in technology can help your team work through last-minute requests more efficiently and with less stress.

 

4. Implement Surge Pricing or Fees

To discourage procrastination and compensate your team fairly, consider implementing surge pricing or fees for last-minute services. Communicate these policies to clients upfront so they know the costs associated with their last-minute requests. Prepare your team for time-sensitive situations by investing in training and providing tools to manage stress effectively.

 

 

To sum up, managing last-minute clients can be challenging, but they are also an opportunity to demonstrate your firm’s ability to go above and beyond. By applying the strategies discussed, you can identify areas for improvement and refine your processes. This approach is vital to the success of your accounting firm and ultimately leads to greater client satisfaction. With the right mindset and approach, you can effectively manage clients with urgent requests and ensure your firm’s continued success.

What is FINSYNC?

FINSYNC allows your small business customers to run their businesses on One Platform. They can send and receive payments, process payroll, automate accounting, and manage cash flow. To learn more about how we can help your small business customers start, scale, and succeed, contact us today.

An open invoice is a request for payment that you have sent to your customers, but they still haven’t paid. In other words, they have an outstanding balance. Open invoices are also sometimes called outstanding or unpaid invoices.

Invoices that stay open longer than intended impede cash flow, which can slow growth or cause downstream problems like the inability to pay vendors or worse, payroll! Monitoring open invoices to be sure customers are paying within the allotted time frame is a critical piece of running a growing business. 

To learn “What Is an Invoice?” visit this previous article that explores the fundamentals. This post details how to track and close your open invoices and how good accounting software will help you save time and money and set your business up for success.  

Track Your Open Invoices

If you are still using a manual or disconnected approach to invoicing, you will need to schedule time frequently to review your invoices, check them against payments received (perhaps in a bank ledger) and then close those that you can. If you’re letting customers slide too often, you may even be unable to pay your suppliers or employees due to insufficient liquidity or cash. To avoid these situations, it is vital to track all of your business invoices.

An invoice tracking system can help you manage the due dates of each invoice and notify you when one is about to expire. This can save your company time and money and reduce the risk of having to actively collect from your customers. This tracking system is often associated with accounting software, which we cover in-depth below. 

If you consistently review a dashboard that automatically tracks open invoices and closes them automatically upon payment receipt, you are regularly aware of which accounts remain unpaid. Then you can work with your customers to receive the funds as soon as possible. From here there are several courses of action with which you can proceed. 

Three Steps to Help You Close Your Open Invoices

The first step in closing your outstanding invoices is to verify their accuracy. Make sure the numbers on each invoice match what was delivered or services provided, and then go from there with supporting documentation such as shipping receipts. An inaccurate invoice can be a significant obstacle to getting paid. 

Second, follow up with customers promptly. You can set up email alerts when an invoice is unpaid beyond a specific timeframe. Or use advanced tracking software to alert you and your customers automatically and sequentially. Also, a polite phone call can often elicit a timely payment as a final resort. 

Finally, be willing to negotiate payment terms with customers if necessary. If you have a customer struggling with cash flow, present them with a partial payment method or other forms of payment such as a credit card through ACH. By being more flexible on when and how you get paid, you may be more likely to collect quickly and efficiently. 

If closing your open invoices continues to be laborious, consider implementing new promotions. You can offer discounts for upfront payments, payment plans, free months of service, or other incentives. Furthermore, take time in the beginning when you create an invoice to include clear payment instructions, so your customers know exactly what they need to do to pay you.

How to Track Your Invoices Using Accounting Software

Using accounting software like FINSYNC, each invoice created has an “unpaid” status by default until the payment has been accepted. When you log in and view your accounts receivable, you can quickly identify the still open invoices. 

An accounting platform can create reminders that are automatic and emailed on an ongoing schedule, daily, weekly, etc., until payment is received. This type of system enables you to be proactive. Sometimes the best way to tackle a problem is to address it right away before it becomes a bigger issue. 

In addition, the FINSYNC accounting platform can provide additional features such as the ability to create recurring, duplicate, and specific project-based invoices. Along with many other features to simplify your cash flow management.    

Summary

Open invoices can have a negative impact on your business’s cash flow and revenue. Every business owner should have a tracking tool that helps them monitor their business’ financial management and operational health.  

You can monitor open invoices by manually entering them into your ledger. However, the best way to close open invoices is with an automated accounting solution like FINSYNC. The good news is that you can reduce your outstanding receivables and improve your bottom line with just a few simple steps. 

 

FINSYNC provides a straightforward way to collect invoice payments directly from a customer’s bank account. You maintain control over all your payments, saving you time and money. 

As a small business owner, you wear many hats. In addition to managing your product or service, you also have to take care of the finances. It is common for owners to handle their accounting and bookkeeping, at least at the early stages of their businesses. However, as the business grows, it can become increasingly difficult to keep track of everything. At some point, it may make sense to hire an accountant or bookkeeper. But how do you know when you’ve reached that point? How do you find a bookkeeper or accountant who you can trust? 

This article addresses these questions and details FINSYNC’s accountant and bookkeeper matching program. By the end, you will understand the benefits of these financial magicians and recognize the value of being matched personally to the most qualified individuals for your organization.

Is Your Business Ready for an Accountant or Bookkeeper?

The decision to hire an accountant or bookkeeper should not be taken lightly. There are many variables to consider in making this critical choice, including how well you manage the finances on your own and if there is enough in-house experience. It is also critical to scrutinize your revenue stream, current and projected. A lot can change over just one quarter, so it is essential to think through the situation thoroughly. 

Here are some signs that it might be time for you to outsource your accounting:

• • You are spending too much time on bookkeeping tasks and not enough time on revenue-generating activities.
  • You are making errors in your financial reports.
  • You are not keeping up with invoices and bills.
  • You are not sure how to file your taxes.

If any of these sound familiar, it is likely time to get some help. An accountant or bookkeeper can take care of your financial tasks, freeing up your time to focus on running your business. They can also provide valuable insights into your financial situation and help you decide where to invest your money. 

FINSYNC’s Bookkeeper and Accountant Matching Program

When finding a bookkeeper or accountant, you want to make sure you find someone who is a good fit for your business. FINSYNC is proud to partner with some of the country’s most reputable CPA firms. Our proven criteria ensure that you’ll be matched with the right person for your needs, whether you’re a small business owner or a large corporation. And because we’re free to use, getting started involves no risk. 

Start with a quick and easy 5-minute form that helps us to get to know your business. We then match you with someone who fits your criteria, including budget, location, industry, experience, accounting needs, business objectives, and bookkeeping requirements. This way, you can be sure you’re getting someone who can help your business run smoothly and efficiently.

We vet all the bookkeepers and accountants in our network to ensure they have a clean history, which helps protect your organization. We also perform background checks as it is crucial to choose a bookkeeper or accountant who is both competent and trustworthy. Above all, we make sure your financial records are in good hands and that your business is protected from unnecessary risks.

By offering this free service, we can better serve our clients by connecting them with the right person at the right time. FINSYNC’s matching program was developed from years of experience and research, and we are confident that we can provide the best possible match for your needs. There is no need to go through the time-consuming and expensive process of hiring a full-time professional.

Benefits of Hiring a Bookkeeper

Hiring a bookkeeper may be a game-changer for your organization. You can review the differences between a bookkeeper and accountant in our previous article. For now, it is essential to understand that keeping accurate financial records is essential for any business, but it can be time-consuming and daunting, particularly for those who have not worked in the industry. 

A bookkeeper can handle all of the financial aspects of your business, including invoicing, payment-processing, debt collection, and tax preparation. Also, a bookkeeper can help you stay organized and track your spending, controlling your cash flow which is a valuable service, particularly if your business is growing. Overall, hiring a bookkeeper is an excellent way to support the success of your small business.

Benefits of Hiring an Accountant

Small businesses have a lot to gain from hiring an accountant. An accountant can help you manage your finances, maximize profits, and comply with tax laws. Navigating the appropriate write-offs can save the business money, and filing correctly will help you avoid costly penalties.

An accountant can also provide valuable insights into your financial data, helping you to make better business decisions by supplying valuable insights into where the business is spending its money and where there may be opportunities for cost savings. An accountant can also help create financial statements and forecasting models to make important decisions about the future of the business. Hiring an accountant can give a small business the professional guidance it needs to succeed.

Best of all, an accountant can create a cash flow management process to keep you organized and on top of your finances. This will free up your time to focus on other areas of your business, such as marketing and sales. 

If you’re unsure whether you can afford an accountant, keep in mind that the cost of not having one can be much higher. Delinquent taxes, penalties for errors, and missed opportunities can quickly eat into your bottom line. So if you’re serious about growing your small business, hiring an accountant is a wise investment.

Conclusion

If bookkeeping and accounting are taking up too much of your time, it might be time to hire some help. An accountant or bookkeeper can take care of all the details so you can focus on running your business. Whether you’re looking for someone to handle all your accounting needs or only need occasional help with bookkeeping, the Bookkeeper and Accountant Matching Program can help you find the perfect fit.

 

Get matched today to a certified and vetted professional through FINSYNC.

When consumers purchase a product, many things happen behind the scenes before that box hits their front porch. Manufacturers need to order materials and components for producing the product, receive them, house them in a warehouse, and assemble and distribute the final product. 

During this process, there is a lot of data to keep track of, such as lot numbers, serial numbers, costs, quantities, expiration dates, etc. This data needs to be tracked and continually updated after every step to ensure efficient production. 

Inventory management is the process of tracking and managing inventory from the time it is acquired to the time it is sold. Inventory includes raw materials, work in progress, and finished products.

Establishing an accounting system for inventory is essential to maximizing profit. In this article, we will discuss the entire inventory management process, from tracking raw materials and the benefits of implementing an inventory system. Additionally, we will walk you through selecting a system that works for you and your organization. 

Benefits to Managing Inventory

There are many benefits to managing inventory and putting a system in place that is consistently updated when changes are made. Inventory management systems can help businesses track their inventory levels and prevent stockouts.

Inventory systems can also help businesses save money by reducing the number of raw materials and finished products that need to be stored while still ensuring enough product is on hand to meet demand.

Creating a consistent process will help businesses maximize their income by ensuring that finished products are sold quickly while preventing a surplus of stock from being moved.

Initial Steps

The first step in inventory management is acquiring and tracking raw materials. Raw materials can be purchased from suppliers or extracted from the environment. Once raw materials are received, they must be stored until required for production. Inventory systems track all raw materials’ quantity, location, and condition.

After receiving materials, they need to be stored in a warehouse or facility until it is time to assemble the final products. 

During production, the process from storage to the assembly line is called work in process. Production can be done in-house or outsourced to manufacturers. In either case, inventory management systems track the progress of production and the finished products as they are completed.

Once production is complete, the finished products must be stored until sold. It is essential to track all final products’ quantity, location, and condition. When customers purchase products, the system is updated to reflect the decrease in inventory after distribution.

Selecting a System

If you are interested in implementing an inventory management system in your business, keep a few things in mind. The central place to start is determining what type of system you want to use. 

Inventory management systems can be either manual or automated. Manual methods are typically less expensive to implement, but they require more time and effort to maintain. Automated systems are the opposite, more expensive to implement, but they can save you time and money in the long run.

Additionally, it would be best to establish how often to update your inventory levels. Inventory levels can be updated daily, weekly, monthly, or quarterly. Updating stock levels more frequently will require more time and effort, but it can help you track your inventory better.

Inventory Accounting

Once you have decided on a system, you need to track three things:

1. Inventory Quantity – can be tracked through your method of choice, either manually or automated.
2. Cost of Inventory – includes the purchase price, transportation costs, and storage costs.
3. Value of Inventory – the inventory’s selling price minus the cost.

Choosing the right inventory valuation method is a crucial step as it can significantly impact your reported profitability. There are two main inventory valuation methods, LIFO (Last-In-First Out) and FIFO (First-In-First Out). These terms originate from when goods were moved around on shelves in stores. The method determines the price point of the product. An item can be sold at a higher price due to increased demand or at a lower price due to expiration, storage costs, etc. 

Here is a simple example to illustrate the difference between FIFO and LIFO. Let’s say a toy company buys and sells drones for kids. This company has purchased four drones per month in January, February, March, and April. However, due to inflation, the cost of the toy for the company got more expensive. There is a consistent cost increase for each successive month. Refer to the table below.

The toy company just got a shipment request for 12 drones. Refer to the table below to see the difference in COGS for the FIFO method compared to LIFO. 

Using this example, the toy company would probably institute the LIFO method as this number reflects a higher inventory cost, meaning less profit and fewer taxes to pay at the end of the period.

Conclusion

Overall, inventory accounting aims to keep track of the cost of goods sold (COGS), which includes the cost of acquiring, storing, and selling inventory. COGS is a crucial metric for businesses because it directly impacts profitability. As a result, companies must carefully track their inventory levels and monitor their COGS to ensure they are maximizing profits.

Inventory management is an essential part of any business. Businesses must have an accurate picture of their inventory levels and costs to make informed decisions about purchasing, pricing, and selling products. This system is critical for any business that sells physical products; accounting for them consistently can be the difference between success and failure. 

 

Learn more about accounting with FINSYNC’s cloud-based accounting platform to help you better manage your business operations.

 

Regardless of your industry, data leakage happens everywhere. Cyber threats, security breaches, data scraping, or theft are just a few examples of potential security attacks within an organization. Now is the time to apply a straightforward but often underutilized tool – the audit trail.

Electronic storage and data handling have revolutionized many markets within the technology sector, such as financial institutions, insurance, manufacturing, and healthcare. However, these same tools that have made workload more efficient have also left many companies vulnerable. The reason is that most or all of their data is now located in one place. 

This article answers the question, “what is an audit trail?” We also dive into the benefits, specific industries that rely on audit trails, and examples.  

Defining an Audit Trail

An audit trail or log is a sequential record that details the transaction history, work event, financial ledger entry, or other data traced back to the user who performed the act. The purpose of this tracking is to construct evidence for regulators in cases of suspected fraud or illegal financial activity.

Audit trails are used in accounting if an auditor needs to verify figures such as revenue, gross profit, and cost of goods sold (COGS). COGS is confirmed by reviewing the transaction logs captured at the time of record creation, alteration, or deletion carried out during the period.

Below is a sample of FINSYNC’s audit log. This report allows users to see a chronological list of changes to their financial management records. Any human user or system that updates a record or accesses the records becomes part of the complete audit trail. 

These individual data references are what an audit trail tracks and records sequentially to verify accuracy. A business can easily set up an audit log process to quickly identify improperly accessed information.

Industry Examples

Implementing an audit trail is often a regulatory requirement in many financial sectors and accounting best practices. Without the use of audit logs to confirm financial information, there would be no ability to reference the legitimacy of a company’s financial reports.

The healthcare industry is considered one of the early adopters of audit logs. Hospitals and clinics must abide by HIPAA guidelines to protect patient confidentiality. Therefore, audit trails and logs are vital to accurately track who has access to a patient’s private information.

Healthcare audit trails also assist the insurance industry. Suppose a patient experienced a medical mistake such as a medication error, delay in treatment, missed follow-up, or inadequate patient monitoring. In that case, these are just a few examples of data that would be important for an insurance company to track to determine what part of the process led to the mistake. 

Another industry where audit trails proved very useful is cryptocurrency. Cryptocurrency spoofing is the process where criminals attempt to influence the price of a digital currency by creating fake orders. The object of the con is to trick investors into buying or selling so that cryptocurrency value is adjusted. Spoofing is highly illegal and traceable, thanks to audit logs.

Benefits of an Audit Trail

Audit trails are highly beneficial for organizations that manage sensitive customer information. These companies are held to the highest confidentiality standards to prevent cybercrimes and illegal scraping of critical data. 

While many businesses employ software security tools such as firewalls, antivirus software, and encrypted password managers, these tools tend to focus on external attacks. However, current statistics show that over one-third of all security breaches reside internally. 

Additionally, a data audit trail can help an organization recover data and return it to its original state. Software logs that track a data history change will sometimes allow you to revert to a previous state, and this tool is vital if critical data is lost.  

With cybercrimes becoming more widespread, integrating an audit trail is the most effective step to ensure data protection. By incorporating this tool, an organization can prevent data theft before it causes irreparable damage.

 

Try out FINSYNC’s Complete Solution, and you will be well on your way to creating audit trail coverage in your organization.

 

Whether your company is merchandising, manufacturing, or service-based, keeping track of your production costs is vital. To optimize your total output and expenditures, you need to understand and track marginal cost and revenue. 

Whenever a company increases its production, there is always an increase in production costs that must be recognized. Marginal and variable costs consider these increases and determine the optimal amount of units or labor required to keep production costs as efficient as possible. 

We have already covered the importance of tracking variable costs within your organization. Now we will discuss the importance of marginal cost and marginal revenue and why they are critical concepts in managerial accounting. 

Importance of Marginal Cost

Marginal cost refers to the additional cost to produce each additional unit. In other words, this cost shows the increase or decrease in the cost of making one more item in production. The formula for calculating marginal cost is below:

For example, if the cost for a company to produce 10 units of a product or service is $5,000, and the cost to build 11 units is $5,010. In this case, the marginal cost for that additional unit is $10.

Marginal cost plays a crucial role in an organization, especially when a company must decrease its costs. Fixed costs are constant regardless of production levels; higher production leads to a lower fixed cost per unit as the total expenses are allocated across more units. 

The marginal cost of production includes all expenses not fixed. For example, if a company needs to buy a new piece of equipment to produce more units, this is a marginal cost. The marginal cost varies according to the volume of the products constructed.

Marginal Revenue

Marginal revenue (MR) is essentially the opposite of marginal cost. MR is the increase in revenue that results from the sale of one additional unit of product and is calculated by dividing the change in the total revenue by the difference in the quantity.

While marginal revenue can remain constant over a certain level of production output, it follows the law of diminishing returns, which states that any production increase will result in smaller increases in output. It means the company has surpassed its optimal level.

Example: A lava lamp business brings in $30 in revenue by producing its first lamp. Initially, its marginal revenue will be $30. If the same company makes a second unit and brings in another $25 in revenue for a total of $55, then the marginal revenue gained from that additional unit is $25. 

Over time as the demand for lava lamps increases, output increases, and eventually, there will be a point when the business incurs more significant variable costs. For example, if the company is now producing 1,000 lava lamps per day, they eventually need to hire extra staff to package or run quality control checks. Thus the marginal revenue decreases to $23, then $22. The curve begins to slope upward when operations become less efficient and profitability decreases.

Working Together

Both marginal cost and marginal revenue work in tandem to help businesses set their output target in production. These two metrics are adjusted as production costs fluctuate. The ultimate goal is maximum profitability when marginal cost and marginal revenue are equal. 

If marginal revenue were greater than marginal cost, then that would mean the company can continue making more units until the marginal cost is higher than marginal revenue. As we discussed previously, this diminishing returns point is where the company is losing money in producing more units and should scale back on output or increase the sales price. 

Although having a high marginal revenue over a long period is not always a good thing, this discrepancy shows that the company is continually not meeting its customer demand. 

On the other hand, when marginal revenue falls below the expected value, it is important to conduct a market analysis to determine the reason. Possibly there are too many competitors saturating the market, or the market trend for the product has peaked. Either way, the cause must be revealed in order to prepare for the next steps.

Conclusion

Every organization must focus on increasing revenue and net income to improve profitability. Therefore, businesses need to concentrate on how each sale affects the bottom line to produce stable sales revenue flows. To do this, you must track marginal revenue and marginal cost.

Ultimately, analyzing these two numbers and how they impact each other is critical to maximizing your profit, optimizing your team’s performance, and overall your company’s productivity.

 

Now that you are familiar with marginal cost and marginal revenue, it is time to put this into action. Signup for a FINSYNC free trial to experience financial harmony with your business.