4 Ways to Reduce the Accounting Costs for Small Businesses

Accounting is a significant part of business. It also commands a significant sum of money. One of the many objectives of accounting is to reduce costs so it is only appropriate that a company’s accounting department operate at the most efficient price point available. This can be achieved by controlling and analyzing cost reduction targets in the department.

  1. Cost Reduction

The easiest way to reduce costs and increase your profit is to introduce a cost control and reduction program throughout your company, including the accounting department. Choose your cost reduction targets wisely or else you risk crippling your company development. Consider cost cutting from a marketing strategy viewpoint — you create value by focusing on producing what the client needs — and from an accountant’s perspective — by eliminating waste. Assess your organization as a whole.

2. 5S Analysis

The 5S analysis implies five steps (beginning with the letter S) for reducing the costs by eliminating waste: sort (dispose of all useless items); straighten (reposition furniture and equipment to best serve the process flow); scrub (clean the work area); systematize (establish schedules for regular cleanings); and standardize (incorporate the 5S system into standard company operations, including a monitoring process). 5S is a methodical process applied gradually to avoid disrupting the entire company.

3. Outsourcing

Outsourcing takes place when you contract with an outside provider to conduct some of your company’s recurring internal activities. You can outsource routine activities, such as financial bookkeeping, accounting and reporting, in order to reduce your costs and to increase efficiency. Some of the reasons for outsourcing include reducing operating costs and capital investments; access to more affordable technology, skills and expertise; accelerated growth; and improved credibility and image through association with expert providers.

4. Back-office Accounting

Back-office accounting refers to administrative functions that support but are not directly involved in the operations of a business, such as accounting or human resources. The front office, on the contrary, represents the client-facing part of the firm and includes the roles that focus on working with and for clients, such as business development or sales. By locating your back-office accounting in low-cost areas, you can reduce the costs of your accounting department.

Why should you reduce accounting costs?

Small businesses need to grow. To grow, a small business must make wise decisions on where it would spend its money. The business’s accounting department serves to reduce its costs but the department itself needs money to operate. One wise decision would be trying to reduce all the costs as much as possible, one area being the accounting department. With everything that this article has taught you, dear reader, you must already realize that there is a huge plethora of ways to accomplish this task and you are not limited to just one. Good businesses use these wide array of options for reducing accounting costs. Great businesses mix and match them according to their needs.

Source: IBN Tech blog