4 Telltale Signs of an Inadequate Accounting System

4 Telltale Signs of an Inadequate Accounting System

By Andy Knutson, CPA

As your business grows and evolves, you may change your space, equipment, and employees to keep up. But what about your accounting system? Although some companies may never outgrow a basic accounting system such as QuickBooks, others, particularly those in retail, manufacturing, and construction industries, may quickly find it lacking. This can lead to shoddy data, issues with timing, and poorly vetted decisions—none of which bode well for a growing business. Concerned? Here are four telltale signs of an inadequate accounting system.

  1. Your accounting needs are changing.

Have you added a product line? Expanded your operations to the point where you’re now dealing with inventory and work in process? Secured a backlog of projects? Opened an online store? Whereas a basic accounting system may have worked when your business was in its infancy, these types of shifts may require an upgrade. Yes, you may be able to cobble together other systems to make your original system work; however, this is almost always a temporary solution that can also open the door for duplicate processes and costly errors. Instead, consider migrating to a robust system that handles all of your accounting needs on one platform.

  1. Your data entry doesn’t match your workflow.

Your accounting system should work for and not against you. If your data entry process isn’t lining up with your workflow, it may be time to find a better fit. Make sure the data is being entered while the work is being done and not recreated after the fact! Time report data should be flowing into your system electronically from your employees as they log in and out; it shouldn’t be entered manually at the end of the pay period. The same is true for inventory transactions and equipment usage.

  1. You aren’t getting the reporting detail you need.

While a basic accounting system will provide some level of detail in its reports, your business may require more. Many accounting systems offer the ability to drill down into certain line items by job or division. You could also allocate indirect expenses in order to view true job performance. These are the kinds of details that can help you pinpoint issues and grow your business while also increasing profits (unfortunately, they don’t always go together).

  1. You don’t trust your accounting system.

You should be able to wholeheartedly rely on the information provided by your accounting system. If you’re not, it could be time for a change. But first, consider this: your accounting system is only as good as the data going into it. Before you seek out a new system, give your internal processes a thorough review.

One final thought: Like any software, your accounting system won’t solve problems by itself. As a tool in your business-owner tool belt, it needs to be wielded properly. As you weigh a change in your accounting system, make sure you have the right people involved—and the right buy-in from your staff. Don’t hesitate to give our accounting firm a call if you have questions or would like guidance as you navigate this important decision.

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