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7 Accounting Best Practices to Streamline Your Accounting Process

In this article, we explain accounting best practices. Is your accounting streamlined and effective? Check out “The Ultimate Accounts Payable Survival Guide“ eBook.

Learn how to effectively manage your finances and improve profitability for your business with this guide to accounting best practices. For best practices in accounting, your team performs most accounting in-house with software that streamlines accounting processes for efficiency and cost reduction. To reach some finance goals, it’s recommended that you also budget for and access the external global accounting services market. 

The global accounting services market, as defined and shown in the following statistics from The Business Research Company in its “Accounting Services Global Market Report “ highlights, is substantial:

The global accounting services market grew from $640.7 billion in 2022 to $675.14 billion in 2023 at a compound annual growth rate (CAGR) of 5.4%. The accounting services market is expected to grow from $795.99 billion in 2027 at a CAGR of 4.2%. The accounting service involves summarizing, analyzing, auditing and reporting of the financial transactions to tax collection agencies and entities. It also involves auditing and preparing financial statements, designing accounting systems, developing budgets and accounting advisory.

1 – Outsource Payroll 

Accounting best practices for small businesses includes outsourcing payroll. Outsource payroll to a payroll service company that may also provide benefits outsourcing. Payroll rules are extensive and require strict adherence. Small businesses often don’t have the in-house expertise required to ensure payroll accuracy and regulatory compliance. If payroll isn’t timely and payroll taxes aren’t submitted on time, then employees are unhappy and penalties could be an issue. Reputable payroll outsourcing companies include ADP and Paychex, which charge reasonable fees for payroll and benefits processing. Another advantage is setting up direct deposit for employees with an online payroll service. 

2 – Use Accounting Software

Your company can start with accounting software for small business like QuickBooks Online or QuickBooks Desktop, with its limited number of users. Or you can think about starting with Sage Intacct, which has scalability from small businesses to midsize companies and some larger enterprises. Sage Intacct targets companies with 2 to 2000 employees. 

Sage Intacct software has received approval from the AICPA because it helps your company implement and comply with GAAP (generally accepted accounting principles). As your budget, requirements, and company size expands, you can either keep using Sage Intacct, with its multi-dimensional reporting views and simplified chart of accounts, or migrate to other midsize business accounting software like NetSuite or Microsoft Dynamics.

Reconcile bank account statements to the general ledger cash accounts promptly each month, using the bank reconciliation features of your accounting software. 

3 – Add-on AP Automation Software

Once you’ve implemented an ERP system or accounting software, strongly consider integrating it with add-on AP automation and mass payments software. The automation software from Tipalti streamlines your end-to-end accounts payable process to shave up to 80% off manual invoice processing time. Tipalti AP automation software is an excellent answer when selecting the best accounts payable software. Customers agree, staying with Tipalti software and allowing Tipalti to achieve an outstanding 98% customer retention rate.  Tipalti’s customer base totals over 3,000 in March 2023. 

Tipalti collects W-9 or W-8 forms from global suppliers through a white-branded, self-service Supplier Portal. It tracks supplier payments and automatically gives your company reports for preparing 1099 or 1042-S forms. Or you can opt to buy and use partnered Tax1099 software to automatically complete tax filing by using eFile for 1099-NEC and 1099-MISC forms with 12 calendar months of imported Tipalti payments data.

Tipalti handles invoice flow, reducing fraud risk and errors with 26,000+ automated rules for payments. Tipalti performs database screenings, validating supplier TIN numbers, and checking blacklists, including OFAC sanctions lists. Tipalti software lets designated approvers approve matched invoices online or through a mobile app or email, wherever they are, whenever they want to approve. 

Payments can be made in large scheduled batches for efficiency. Tipalti is a money services business (MSB) with money transfer licenses in all U.S. states issuing MTLs. Tipalti is also regulated in the UK. Tipalti has relationships with many banks, including the Big 4 of JP Morgan Chase, Citibank, Bank of America, and Wells Fargo, to find the best route to process your payments when timely payments and bank payment processing matters. This distinction makes Tipalti a reliable payments solution. 

Tipalti performs real-time payments reconciliation for batches that can include multiple payment methods and currencies. Tipalti also lets you shift payment processing fees to payees, if desired and allowed by contracts. This automatic reconciliation feature can help you speed up the monthly close during the accounting cycle by up to 25%.

How can your business use best practices in accounting?

Download our white paper, “The Holy Grail of Accounts Payable” to learn how your company can implement accounting best practices relating to payables. 

Use efficient AP automation and mass payments software to onboard global suppliers through an online self-service portal, eliminate manual processes and data entry for invoices, make mass batch payments, automatically communicate payment status, reduce fraud and errors, and achieve tax and global regulatory compliance.

4 – Focus on Cash Flow

Businesses with the right priorities are adept at cash flow management. They forecast cash flow for their short-term and longer-term business plans and budgets. These companies have a constant view of cash, aged accounts receivable from the accounts receivable cycle, and accounts payable balances and vendor invoice due dates to speed collections and make timely payments to earn early payment discounts when feasible. They know when financing will be required to increase their financial flexibility and pay bills. They also analyze potential projects to see if the returns are justified with discounted cash flow analysis and project ranking.

5 – Have Strong internal Control

Businesses must implement and maintain a strong system of internal controls. Accounting department structure best practices includes segregation of duties. The segregation of duties would include having at least two different employees handling cash vs. recording transactions in the books. 

It’s sometimes difficult to achieve the required segregation of duties to prevent fraud in a very small company. In that case, the small business owner takes control over invoices approval and cash receipts and payments. As the company grows and hires more employees, a business can strengthen its internal control procedures. 

COSO, the Committee of Sponsoring Organizations of the Treadway Commission, updated its “Internal Control — Integrated Framework” in May 2013. 

In the COSO Framework, a system of internal control includes five integrated components:

  1. Control environment
  2. Risk assessment
  3. Control activities
  4. Information and communication
  5. Monitoring activities

From the COSO About Us page:

 “COSO was organized in 1985 to sponsor the National Commission on Fraudulent Financial Reporting, an independent private-sector initiative that studied the causal factors that can lead to fraudulent financial reporting. It also developed recommendations for public companies and their independent auditors, for the SEC and other regulators, and for educational institutions.

The National Commission was sponsored jointly by five major professional associations ​headquartered in the United States: the American Accounting Association (AAA), the American Institute of Certified Public Accountants (AICPA), Financial Executives International (FEI)​, The Institute of Internal Auditors (IIA), and the National Association of Accountants (now the Institute of Management Accountants [IMA]). Wholly independent of each of the sponsoring organizations, the Commission included representatives from industry, public accounting, investment firms, and the New York Stock Exchange.

Implementing internal controls is part of Enterprise Risk Management (ERM), which is also addressed by COSO in its updated 2017 version of “Enterprise Risk Management — Integrating with Strategy and Performance.

In public companies, the CEO and CFO must include quarterly certifications regarding internal controls adequacy and financial statements fairness of presentation and disclosures per section 302 of the Sarbanes Oxley Act. These corporate officers are also responsible for section 404 implementation of SOX annually through internal control assessment and testing. Note the differences between Sarbanes Oxley Section 302 vs. Section 404

Accounting policies and procedures best practices incorporate good internal controls. This includes establishing company policies to enforce business travel, automobile allowances or company vehicles, and employee expense reimbursement. Company policies also establish internal control procedures for designated approval levels and invoice approvers and other essential business topics. 

6 – Hire a CPA Firm

Your startup company can choose between the cash basis or accrual accounting method. It may be wise to start with accrual accounting which complies with GAAP accounting standards, but cash basis accounting may be more suitable for taxes. Consult your CPA firm. 

At some point, you’ll want a public accounting firm that can prepare business tax returns and review (for a lesser scope and fee) or audit financial statements for the business. 

CPA firms not only help businesses (and individuals or trusts) with income tax preparation, but they also advise on tax strategies. 

In an external audit, the CPA firm tests a sample of underlying accounting records, makes inquiries, sends balance confirmation requests, performs recalculations, tracing, and analytic reviews for reasonableness, and analyzes GAAP compliance.

7 – Consider Hiring a Fractional CFO

As your company with high growth potential begins to experience growth but can’t afford to hire a full-time CFO consultant besides a Controller, consider hiring a part-time CFO. The fractional CFO can work a limited number of hours per week or month to help you with preparing strategic and business plans with cash flow models, decision support, and obtaining financing or completing due diligence on an M&A transaction. The part-time CFO can prepare financial reporting and financial information highlights for the Board of Directors, with CEO review and approval. 

The fractional CFO can also look at the company’s financial statements, financial accounting, and underlying transactions like journal entries and account reconciliations to improve accuracy. (This would not be considered an independent external review or audit.)

The part-time CFO may train and mentor your other employees in the accounting function to help their future career growth. The part-time CFO can instruct and direct other financial department employees in preparing ratio analysis to better understand the financial health of the company. 

Compensation for a fractional CFO is either structured as a retainer or as an hourly fee, generally ranging from $250 to $500 per hour. Your company can decide on the number of hours and scope of the fractional CFO’s work that will fit its budget. 

Final Thoughts

Establishing best accounting practices to properly structure accounting and finance in your company is essential to solving potential accounting problems. To prepare for current bank lending, a future M&A buyout, or IPO (given good market conditions, valuation, and qualifications), establish good internal controls and efficient accounting practices in accordance with GAAP as soon as possible. 

You don’t want delays from correcting remedial accounting errors to the income statement, balance sheet, and cash flow statement produced with insufficient software systems for bookkeeping and business finances. Consider using outside payroll, accounting, and finance services when it adds value at a reasonable price.

When you use Tipalti AP automation and mass payment software with your ERP system or accounting software, your business will:

  • Substantially increase efficiency by eliminating time-consuming manual work
  • Reduce costs on your quest towards business profitability 
  • Reduce fraud risks and errors
  • Gain tax and global regulatory compliance
  • Have a finance software solution that scales with your growing company
  • Have more time to shift to analyzing financial data and making valuable company contributions. 

Download our eBook, “The Ultimate Accounts Payable Survival Guide.“

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