Many times we meet business owners who talk about how they already have an accountant who does the “accounting” but then, they go on to ask rather curiously “what is it that you do?”

Management accountants work hard to interpret financial information in order to make practical and successful business decision. Generally, the role of management accounting combines finance, accounting and management that are known to be the key ingredients towards driving success to any business. Management accountants offer business data and analysis to business managers so they use this information when making critical business decisions. This role calls for involvement with the general business management and working in collaboration to analyze revenues and costs. In particular, management accountants provide monthly management accounts, forecasts and budgets that help immensely in business planning.

Management accountants usually have a rich background in the business industry and this gives us a very sharp insight to the new and upcoming trends in the world of business and accounting. We understand exactly how specific parts of a business work and more importantly, we understand that not all business decisions are based solely on finances.

The management accountants industry is all about moving on from the finance department and into all the areas of an organization. Management accountants usually have a very strong financial background and this, together with the business experience a team possesses, makes them important individuals to drive your business to sustainable success.

We aspire to offer our management accountancy services to businesses that usually do not have the required resources to employ a full-time accountant. It’s time you considered hiring management accountants. So leave it to us- our more than capable team of management accountants will work seamlessly with your corporation to offer the success your business needs.

How to maintain an own Accounting department for your business in a cost-effective way

Cost Effectiveness of Virtual Accountants in Sri Lanka

Businesses always have this question in mind: “Do we need to hire an In-house Accountant or outsource?”

Hiring an experienced Accountant will definitely support business owners to build a solid accounting platform to their business, which will help business owners to scale the business without any back-end difficulties.

However, to acquire such an experienced accountant at an affordable rate is a key challenge faced by the business owners, and retention is another challenge.

Junior Accountants might be inexperienced, but they are easily affordable by any business because of their minimum cost. With the right training and supervision, it can be ensured that they perform the duties on time and accurately.

Virtual Accountants are the cost-effective way to overcome business owners’ challenges. Where junior accountants will be handling the routine accounting activities, Virtual Accountants will be responsible for setting up proper controls in place and monitoring, ensuring the accuracy of the book, providing necessary guidance, supporting & training the junior accountant, reporting on time and supporting organizational growth.

This concept will cut down the cost of an Accountant, and Business owners’ dependency on accountants in a traditional way of accounting.

“Many business owners and CEOs rely largely on in-house bookkeeping and accounting in order to obtain the financial statements for each month simply because this is something they have been used to doing for many years. With the rapid advancements in technology in the recent past, the traditional accounting methods may not be the best option when it comes to managing the finances of your company.”

A checklist that you have to follow before making a decision about hiring your accounting team:

• The Evaluation of Skills, Experience and Qualifications

Always make sure to look into the experience and track records of in-house accountants before hiring them. This sort of screening is an essential feature; otherwise, you could end up with a self-taught employee.

Virtual Accountants, on the other hand, offer a better level of expertise and Virtual Accountants are often experts who go through training in technology and accounting. Regardless of whether you opt for in-house Accountants or Virtual Accountants, all you need to make sure is that employees are trained on an ongoing basis so you can ensure accurate financials delivered on time.

• Efficiency in the Internal Control Systems and Practices

Good internal controls will ensure that the information flow is precise, timely and perfectly classified. When your company has only one or two employees who handle your books, then there is a higher risk of fraud, inefficient internal controls and less accuracy. Independent Virtual Accountants eliminate any such risks because there is a separation of duties and stringent steps are taken when delivering financial statements.

• Accuracy and Relevancy of Financial Reporting

For every business, the financial reporting process looks different based on various factors. Your in-house bookkeepers and accountants should have the perfect training and skills in order to provide quality and accurate reporting. However, they would sometimes also have other responsibilities such as Banking, Payroll, Follow up collections, & payments, and this can take time away from their accounting duties. If this happens, financial reporting can get pushed aside and it can impact key business decisions.

With Virtual Accountant services, inaccurate financial reporting can be eliminated because you get to choose what exactly your business requires. It can promote the effectiveness of existing employees and produce accurate and timely financial reporting.

Things to consider before choosing Virtual Accountants in Sri Lanka

• Dedicated team members
• Strict guidelines to ensure that there is no risk of fraud
• Continual training of staff members

Considering the fact that SMEs occupy a fair share of a county’s workforce and the important role they play in the economy, most entrepreneurs fail to realize the importance of accounting management and how it can help them in their growth and to operate economically, ethically and efficiently.

For most SMEs, it seems the main focus of management accounting is on control information instead of decision making. This means that the majority of SME owners and managers are likely to make decisions without a financial analysis or with insufficient financial information. There’s also the case where most entrepreneurs opt to undertake the management accounting role.

Management Accounting Tools most SMEs make use of 

According to a study, most SME entrepreneurs utilize:

• Informal CVP or Cost-Volume-Profit analysis
• Service/product costs for profitability and pricing analysis
• Working capital measures

In light of this, it become apparent that they did not understand their costs which lead them to make the wrong decisions related to their pricing. Most entrepreneurs also showed a failure to manage their working capital and cash flow effectively.

The type and amount of management accounting taken on are dependent on quite a few factors:

• The quality of the organization’s operations and the setting it operates in.
• The size of the organization
• External stakeholder requirements
• Senior managers’ background experience
• Financial restrictions with regards to cash flow, profitability and credit availability.

Given the fact that most SMEs typically fail within the first five years of their business, it is of paramount importance to use formal budgetary planning, formal budgetary control systems, formal CVP analysis and responsibility centers to continue their operation.

How Management Accounting education can help enterprises prosper

In regards to the cost of using management accountancy tools, it can vary. While Excel spreadsheets are commonly used, an integrated software solution will certainly save entrepreneurs precious time and money.

That being said, SME executives can greatly benefit from the existing management accounting tools that support decision-making like capital expenditure appraisal methods, cost analysis, etc. Other tools will help in dealing with risk including payoff matrices and expected values. It’s important to educate new entrepreneurs on the essential need for working capital management, product costing, etc, so that they can operate successfully.

Lastly, management accounting education is vital to SME executives, particularly when they are operating a business that is growing. Failing to utilize specific tools like responsibility centers might be suitable for a small business, but it is erroneous for a medium enterprise. This is because, at some point when it’s time to elevate the product range, for example, some methods that were disregarded will become highly relevant.

Healthy finances result for a healthy business and during the current economic climate, business owners need to keep a close watch on their finances to keep their heads above water. Here are some tips for new and small established businesses:

1. Be aware of your gross profit which is the profit you make from selling your products. It is not unusual for businesses to sell their products for less than they cost to produce because they don’t know their real cost.
2. Manage your cash well. As the saying goes- ‘Turnover is vanity, profit is sanity, but cash is king.’ Without cash, our business will not succeed. There’s a lot of truth in that saying.
3.  Set a budget. Spend a couple of hours noting down your forecast for the next year. Every three to six months, make sure to review the forecast and adjust it wherever necessary.
4. Always spend as little money as possible, particularly in the early days. For instance, if you can, work from your home instead of renting an office.
5. Always make sure to file your tax returns in a timely manner as well as paying your tax bill by the due date. Never disregard them and never except them to overlook you.
6. Be organized and keep precise and up-to-date accounting records. Use accounting software to help you because software will help you organize management information that is crucial in helping you manage your business more efficiently. Neat, tidy records will make it much easier for your accountant.
7.  Whatever tasks that take up your time or you don’t understand, you can outsource it. It’s a false mindset to think it’s cheaper for you to do it yourself.
8. There’s nothing that gives a stronger negative impression than not having an office number, particularly if you’re offering professional services. A mobile number will not be enough as your only contact number. There are plenty of low cost options available to pay for a fixed line.
9. Understand that hiring someone new is more expensive than retaining a current employee. Happy employees automatically translate to happy customers.
10. And finally, you may be a small start up business, but you need to act like a successful one.  All the big names didn’t become successful by failing to plan, failing to manage cash or failing to deliver exactly what their customers wanted.