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Name: Carol Evenson

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November 12, 2019 - Advice and Strategy > Management & Finance
A good accounting systems is the best friend a company can have.

Not many entrepreneurs go into business in order to do accounting, for many people accounting is just a necessary evil that the bank demand to extend you a line of credit or something that the IRS wants you to provide once a year, this is a shame because if used correctly accounting can answer a lot of questions about the business it can lead the way to growth and it can help invest assets where they create the most value.

Getting the right information
Before the organization can use the accounting information to better control the flow of assets the first step is to get that information in the first place. Many businesses are only using the absolute most basic accounting system that they can get away with and this is a mistake as a more advanced accounting system can help the company find out what all the assets are doing to help the company and exactly how the liabilities are weighing down the organization. If the company needs help with finding an accounting system that get the information from all the data that is naturally generated in the organization contacting a consulting firm will be the first thing to do, they will go through all the processes in the company from bank transactions, how customers are paying and the way that payroll is created and from that build a system that captures all the data and turns it into useful information for the directors.

What processes to track?
In general, the first and most beneficial process to track is the Accounts receivable process, if tracked correctly this process will tell the directors of the organization about important things like who are not paying on time? Which big customers have stopped buying? Do we need to contact them and ask how to win them back? Should we sell the invoices of the late payers to a third party in order to raise the liquidity in the business?

The second most important process to track would be accounts payable here questions to be answered ranges from which vendors have increased prices the most the last two years? Can we renegotiate the price increases or look for another vendor? Which employee is ordering the most goods and services? Do they have a reason to order all of this or are they being inefficient? How much money do we spend on late fees? Are we paying invoices before they are due and hence straining out liquidity for no good reason?

There will be many more important processes to track but if a company goes from no tracking to tracking accounts receivables and accounts payable a lot of improvement can be reached with modest means.

It will take time
Changing accounting system is not done over a few weeks often it takes a year or more. In order for a successful change in accounting system it is important that all people who are using the system knows why it is being changed and what they which to get out of the new system. To think about and describe the new system and what information to extract from the data can take just as long as the actual implementation and sometimes even longer however, it often turns out to be worth it.


Instead of thinking of accounting as something that is a necessary evil that is just created for the sake of the bank and the IRS think of accounting as a tool that can help a business answer fundamental questions about itself and how to move forward. Good accounting processes can uncover hidden paths to growth, stop unnecessary spending, and even detect and prevent fraud. Investment in a good accounting system that can track processes in a way that makes sense to the directors is one of the best investments a business can make.


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