5 Accounting Precautions All SMEs Should Take

1.Recruitment Strategies for Quality Accounting Professionals:

Recruit Quality Accounting Professionals rather making it easier for you to choose just the right candidate who meets the work-related aptitudes. Here, the approach shall be methodical by Job Recruiting Agencies or you can pick the right candidate by posting on a Job Board. Thus, you reach the excellent way to meet the Skilled Candidate.  

Social Media which is also a fantastic tool can be sought in this aspect. Inform the potential candidate at least a glimpse about Company’s culture. The candidate complements the core values of the Enterprises. Ensure that the selected candidate is right for work ethics and transparent to review thereby meet the Company’s Policies.

What will happen if you don’t have professionals in your office?

Professionalism is nothing but powerful value of competence such that everyone can aspire from day one. It allows you to fulfil your role to the best of your ability. Also note that Professionalism may be unambiguous – an agreed dress code, or your company policy for using social media. Other guidelines and expectations regarded as appropriate behavior at the meetings. There should be an assurance to upholding agreed practices and values. Therefore, it is necessary to have a very good Recruiting Policy (HR).

2.Choosing of Suitable Accounting Software:

In order to run the Company smoothly you need to have good Accounting Software such as

1. TALLY ERP 9, which is an accounting software from Tally Solutions Private Limited and the software can be installed on any PC running Windows XP or higher. Tally is especially for the Indian market.
2. QuickBooks is also an Accounting Software used Globally which is a cloud based online accounting software and,

Other accounting software such as Zoho Books, Vyapar can be used for keeping the accounts up to date.

3.Data entry errors shall be avoided:

Transliterating Errors and Transposition Errors shall be avoided such that you need to input in the correct order. Identify the source of data inaccuracy in such cases which can take time for resources to correct, and if left uncorrected can lead to lost business. Ensure that the work is double checked.  Reconciliation processes shall be introduced.

Review the entries and compare it with the reports from the software to reconcile as to what went wrong and identify the error such that you can rectify the same.  Discomfort, Fatigue and work environment can also become reason for the Errors. Need Good Working Atmosphere. Also avoid overloading and ensure to hire sufficient staff to meet the workload of the company. Ultimately, we need the data integrity.

4.Accounts Receivable Management:

Ensure that you maintain 30 days Receivables only (we meant limit accounts receivables) else, you may run out of cash altogether thereby perform a monthly accounting review with Accounting Team.

Non-payment or delayed payment point of view precaution shall be taken by the Company –

• Identify the defaulting customers and take necessary steps to get the funds from them without spoiling the business relationship. You may have to send your Invoices to Clients early (well in time) thereby push Clients for payment.
• You need to adopt this with the client and still the Client is defaulting then you may charge interest on your receivables despite the Client is facing financial difficulties and take with higher authorities. Thus, you attempt to streamline the payments.
• Also, discounting of Bills can be introduced (as per RBI guidelines) as the financier discounts the Invoice after the corporate buyer accepts the Invoice and bills uploaded by the SME supplier.  This mechanism of discounting the bills allows immediate payment. Hence, there won’t be any delayed payment.

5.Accounts Payable Management:

Expense Tracking and Paying Vendors on timely basis is a must.  Ensure that Accounts Payable we meant, paying to vendors shall not take a back seat.  Apart from increasing payables you must work on the strategy by stretching accounts payable such that you maximize free cash flow.  But, sometimes this approach of delaying payment can eat away the suppliers’ friendliness. Therefore, this may not be a right one. Ultimately, suppliers can slower delivery times and responses when you place urgent orders.  Keep the payables under control and adopt good payables practices.  

SMEs shall take care assuming that Employees shall not be misclassified to avoid Payroll taxes and penalties. Misclassification occurs when businesses classify independent outworkers as workforces or employees as independent contractors.  Because independent servicers cost less than employees, it’s very tempting for some Employers to classify their employees as independent contractors. Maintain accurate accounting records such that Auditors can do their auditing easily. Inaccurate, imprecise accounting shall be avoided.

Last but not the least, avoid delay in making Statutory Payments e.g., Advance Tax, TDS deduction, EPF remittance, ESI Remittance, and Reverse Charge Mechanisms, GST remittances etc. else, you may have to pay heavy penalties and interests which please note.