Introduction
Financial crisis, be it from banks running out of its liquidity and entering default, to unusual behavior of the individuals, mainly investors in withdrawing money from financial institutions, the role of financial crisis is daunting, posing rippling challenges for the Small and Medium Enterprises in any economy. It is marked by the sudden disruptions in the cash-flow, increased operational costs and downturn of the economy.
Accounting Support becomes a lifeline for SMEs in such cases, thereby ensuring stability, clarity and resilience in finance process and decisions. Businesses can now make informed decisions that can guarantee their survival and growth. In this blog, we will explore why reliable accounting support is indispensable during any financial crisis, and how accounting support experts can help you with it.
The Connection Between Accounting and Financial Crisis
Let’s take the reference of the great recession 2008-2009, leading to global financial crisis worldwide. Many people did not only lose their jobs, but also their basic necessity like home, in-order to repay the loans. Some firms and analyst believed that it is the result of fair value of assets under US. GAAP accounting standards, thus blaming it for the crisis.
Of-course not one decision can lead to global recession, but one needs to understand how accounting has a domino effect, which when not managed effectively, can lead to financial crisis – on individual, private or country level.
Financial crisis can disrupt SMEs operations in every aspect by:
- Disruption in the cash flow: When accounting practices lacks real-time expert insights, then any monetary decisions can have a negative output if the pros and cons are not rationally measured. During financial crisis, the revenue stream shrinks, while the expenses remain constant or even increases.
- Debt Management Issues: The SMEs lack stability in cash flow from operations, which is why many a times they take the help of VCs and banks to help them optimize their sales and revenue operations. These existing loans and liabilities can become unmanageable without proper planning.
- Operational Constraint: Financial crises can decrease access to resources, resulting in raw material shortages for small and medium firms. This can lead to operational inefficiencies and business shutdown if not addressed swiftly.
Without accounting support, businesses mainly in the SME sector may engage in risk making decisions that further exacerbate the existing issues, leading to either collapse of the organization or severe financial instability. The need of the accounting support is like a compass in the mirage, guiding in making informed decisions, and navigating seamlessly through the storm.
Why Accounting is Crucial in Financial Crisis
Accounting provides the SMEs with a clear picture of their financial health, enabling them to:
- Identify unnecessary expenditure
- Allocate resources wisely
- Formulate strategies for recovery and long-term stability.
Corient has assisted many small, medium, and large companies in streamlining their accounting processes, allowing the organization to make accurate decisions that will benefit it in the long run. We have helped organizations reach new heights by properly utilizing accounting software products and integrating them with cutting-edge reliable technologies. Read a few of our case studies to know more.
Why an Accounting Support Specialist Is Essential During Tough Times
What is an Accounting Support Specialist?
An accounting support specialist is a financial expert who assists businesses with critical tasks such as bookkeeping, tax preparation, and financial analysis. During hard times or crisis, their expertise becomes invaluable – guiding us to make reasonable informed decision that are neither too objective or practical in nature.
Key Benefits of an Accounting Support Specialist
When the U.S. lost close to $14 trillion during 2008 financial crisis, companies particularly within the SME sector had to shut down their business. Even the family-owned businesses despite their heritage knowledge, could not withstand the financial strain due to insufficient funds. Why you may ask? While they ran the business based on traditional methods, the advent of technology introduced a need for real-time insights and robust datasets to support decision making. This expertise lies within accounting support specialist, that offers:
- Accurate Financial Forecasting to predict cash flow patterns and identifying scope for improvement by preparing the SMEs for potential shortfalls.
- Assisting in setting realistic budget that aligns with current financial realities
- Compliance management to avoid penalties
- Offering unbiased perspectives and advice, propelling SMEs towards the growth trajectory.
Qualities to Look for in an Accounting Support Specialist
- Proven experience in SME accounting
- Strong analytical and problem-solving skills
- The ability to remain unbiased in any decision-making
- Handholding when needed with excellent communication and adaptability skills.
More reasons to trust Corient Business Solutions – for all your accounting needs. We have expert accountants to support you in all process of finance and accounting, providing professional expertise in making calculated risks, while at the same time developing contingency plan to maintain financial stability.
Leveraging Accounting Software Support for Accuracy
Right from providing automation in invoicing, inventory management and audit, to journal entries, ledger posting, trial balance preparation and finally financial statements analysis, software’s help reduce errors and maintain accuracy, all while automating the redundant tasks with utmost precision, free from errors of any kind.
These tools streamline the workflow, and offers real-time tacking so that SME’s can stay on top of their finances most of the time.
Ex: Switching to software’s such as QuickBooks and Xero can help a retail owner named Sarah to manage her finances, by eliminating the need to manually write down sales in the ledger each day. She is relieved of categorizing the expenses and filing invoices to calculate payment due by hand. She also can find profit per month within seconds, a task which would have taken her hours or days when done manually.
With software integration in accounting process, Sarah can now automatically record the sales within the system. She can also upload the invoice and let the system keep track of payment deadlines. For real-time insights, Sarah can log in anytime and see her sales, expenses and profit margin as of a particular data, week or month.
Ensuring Seamless Operations with Software Support
Implementing software is just the first step, you need the expertise of a professional that can help with understanding and implementing correct method of work to ensure that the software is producing what it intends to produce/derive.
- It should be able to troubleshoot any kind of technical issues quickly
- It should regularly update itself to meet compliance standards and changing policies
- Provide training sessions to team members to maximize the software capabilities.
By leveraging the right tools and support, SMEs can achieve greater accuracy and efficiency in their financial processes.
Strategies for Effective SME Accounting in a Financial Crisis
Streamlining Financial Process
Efficient financial management is non-negotiable during a crisis. SME Accounting should then and always focus on:
- Timely Invoicing and follow-up to collect outstanding payments. During a crisis, even the small amount is a huge deal in repaying of loans, or carrying out day-to-day operations in that period.
- Expense tracking to identify unnecessary expenditures and identify areas for cost-cutting.
- Automation of payroll processes to reduce errors and save time
Regular Audits
Conducting regular periodic audits helps identify potential risks and discrepancies, allowing the SMEs to take corrective actions promptly.
Leveraging Tax Benefits and Assistance Programs
During a financial crisis, governments often introduce relief measures for businesses. SMEs should:
- Stay updated on available grants and subsidies.
- Work with accounting specialists to maximize tax benefits.
Cost Optimization and Budget Realignment
The budget should be set to counterattack the ailments of a crisis in a way that the non-critical costs are minimized, without compromising the core operations functioning and quality.
Long-Term Benefits of Reliable Accounting Support for SME’s
- When you partner with a trusted and reliable accounting support partner, you can then make data-driven strategic decisions, whether it be for scaling back operations or investing in growth opportunities etc.
- Such partnering enables strong accounting practices that are prepared to handle economic uncertainties. The service provider analyzes the market trends, changes in policies and regulations, and historic data to create a blueprint for navigating future challenges.
- Transparent accounting fosters trust among investors, lenders, and stakeholders, making it easier to secure funding and partnerships.
- By streamlining financial processes and leveraging insights, SMEs can position themselves for sustainable growth post-crisis.
Conclusion
Historic data, news and business reports has taught us the importance of an accounting support partner, particularly for SME’s that cannot afford to make critical financial errors. In times of financial crisis, the accounting support partner provides clarity and direction to the strategy implementation and work process, for effective functioning in a way that any organization having a hard time can do the bare minimum to avoid collapse.
Surviving for the struggling businesses, and cutting cost and enhancing efficiency for all businesses during a crisis – is what an accounting support partner aims for. Contact Corient Business Solutions to get one-ton-one consultation on your company’s financial health and tailored strategies for growth and evolution. Don’t wait for a crisis to strike – Use Corient’s customized SME’s accounting services to take your business to the next level.
