Many of you might not exactly know the true essence of accounting and payroll, especially to those who are starting up a new business. An idea and a business plan are important to start a business and a strategy is paramount for building a business. However, no one has ever thought of accounting, which is the building block to a booming business.
Why is Accounting Important
Accounting provides entrepreneurs with a clear picture of the business, the rate of success and failure. Though entrepreneurs are not a fan of going through heaps of financial documents, though they are the most important and informative documents of a business. Effective record keeping is essential and helps keep owners informed of the expenses and revenues.
Owners also keep copious records for legal and tax purposes. Accounting is a collective term comprising of various types like cost, management, finance etc. Accounting helps focus on costs of running a business, which involves production and non-production costs, and management. For a new business, focusing on and managing costs is the key to success.
Payroll in Relation to Accounting
Another factor crucial to managing a business is payroll. It is a branch of accounting, which relates with production units, time or a fixed salary. It is the financial record of employees, their wages, salaries, net pay, bonuses and deductions. It is very important to pay your employees on time, no matter what size of amount is paid. Effective payroll calculations and timely transfer might not be as important to employer as it is to the employee.
Employers can also lose huge amounts if execution of the payroll process consists of errors. In small companies, an accountant will deal with all of the financial statements like, payroll, journals etc., whereas in large companies, different individuals are hired to perform different roles. A company’s payroll system influences the morale of its employees and motivates them to work harder especially if bonus payments or share options are linking to the basic pay.
Managing Payroll System
Managing payroll system is also important for tax deductions and lowering tax bills. Often companies use accounting and payroll software, who forget to ask themselves these important questions:
- What are my ongoing annual costs, and what does it include?
- Can I use the same software as my competitor?
- Is the software compatible with others I use?
- What are the limitations in functions offered by the software?
- Is the support staff experienced enough to provide the technical support needed?
- Is the software easy for everybody to use at my company?
Businesses spend a lot of time and money in searching for the right software. Integrating unsuitable software in the business system can be costly to replace and disrupt the day-to-day business functions. No software is compatible with every business and not all software covers every function of a specific business.
Outsourcing a business’s accounting and payroll functions is very common these days and effective results are achieved. Large firms often have their own accounts and payroll departments but outsourcing can help reduce costs and time spent, and a test run might help to lock in on your choice.