Accounting Methods Holding Back Businesses

Practicum Accounting
Are your accounting methods holding back your business?
This article by Mendelsohn (2016) focuses on the increasing irrelevance of Generally Accepted Accounting Principles (GAAP). According to the author, GAAP accounting standards have lost relevance over the last four decades in large part due to the evolution of business models. Today, business models are substantially driven by intangible assets such as brands, intellectual property, and information systems as opposed to physical assets. Under the conventional accounting system, these assets reported as regular expenses, often leading to the misstatement of assets and earnings. Firms like Amazon and Tesla are ideal examples of how GAAP standards do not accurately reflect intangible assets.
8 accounting to-dos for your end-of-the-year checklist
In this article, Morantes (2016) reiterates the importance of having an adequately staffed accounting department. Using the example of the city of Spoken, Washington, which experienced severe accounting problems in 2014 due to an understaffed accounting department, Morantes argues that a well staffed accounting department is a priority for any business organization. Adequate accounting staff is crucial for ensuring proper double-checking of internal operations, full payroll compliance, timely collection of receivables, full adherence to the relevant accounting standards, and accurate filing of taxes. In essence, a well staffed accounting department ensures the avoidance of errors that could lead to revenue miscalculation, expenditure overstatement or understatement, and inaccurate debt monitoring.
5 trends driving disruption in the accounting industry
According to Edwards (2016), technological advancements have led to significant shifts in accounting and bookkeeping. As technology evolves, there has been greater demand for connectivity on the part of clients, increased automation of data entry, more adoption of machine learning technologies, and increased demand for specialisation. Further, with the emergence of numerous accounting applications, many small businesses are shifting to the do-it-yourself (DIY) approach. These trends are changing the way accounting and bookkeeping is done and even affecting the demand for accounting services. Indeed, Edwards notes that there is likely going to be a new accounting industry in the near future.
Getting the most from your accountant means more than just doing your taxes
In this article, Peacock (2017) argues that the role of an accountant in an organisation involves not only accounting, bookkeeping, and tax compliance, but also strategic assistance. She points out that accountants can offer valuable insights on aspects such as resource utilisation and product/service performance. These insights can go along a way in enhancing the company’s bottom line. The value accountants can add to a business can be even more immense in an ever more technologically advanced business environment. For instance, in the wake of technologies such as cloud computing, accountants can save businesses by ensuring real-time access to books. It is, therefore, imperative for businesses to see accountants as strategic partners.
Accrual accounting
This is an article on the concept of accrual accounting. The article defines accrual accounting as an accounting method in which revenues and expenses are recorded as they occur, irrespective of whether cash is actually exchanged or not. As per the article, this method is not appropriate in all situations. It should often be used in the following situations: when a firm’s annual revenue exceeds $5 million, if a business is registered as a corporation, for inventory-based businesses, and for businesses that sell on credit. Save for these situations, it is prudent to use the cash method, wherein revenues and expenses are recorded only when there is exchange of cash.
The accounting industry death is great news for your business
Burdick (2017) pays attention to the implications of the death of the accounting industry for business organisations. As cloud computing, artificial intelligence, and other technologies are adopted in the accounting industry, the traditional way of accounting may be no more in the foreseeable future. Such technologies have changed how accounting is done, consequently lowering costs and increasing transparency, among other benefits. In the wake of these shifts, the accounting industry must adapt to change. The industry must consider how it supports business growth, make more use of freelance accountants, and actively monitor trends.


References
Burdick, M. (2017, August 17). The accounting industry death is great news for your business. Entrepreneur. Retrieved from https://www.entrepreneur.com/article/298649
Edwards, S. (2016, September 23). 5 trends driving disruption in the accounting industry. Entrepreneur. Retrieved from https://www.entrepreneur.com/article/281931
Entrepreneur Staff. (n.d.). Accrual accounting. Entrepreneur. Retrieved from https://www.entrepreneur.com/encyclopedia/accrual-accounting
Mendelsohn, S. (2016, September 7). Are your accounting methods holding back your business? Inc. Retrieved from https://www.inc.com/steve-mendelsohn/are-your-accounting-methods-holding-back-your-business.html?cid=search
Morantes, G. (2016, December 20). 8 accounting to-dos for your end-of-the-year checklist. Entrepreneur. Retrieved from https://www.entrepreneur.com/article/286807
Peacock, K. (2017, August 2017). Getting the most from your accountant means more than just doing your taxes. Entrepreneur. Retrieved from https://www.entrepreneur.com/article/279588