What is Outsourcing?

Outsourcing is not a new concept. It goes back to the Industrial Revolution when large corporations needed to build stability and efficiency and reduce costs by leveraging specialized labor. Globalization, digitalization, and other advancements have made it easier for businesses to outsource, even in a critical field like accounting. Accounting deals with a lot of complicated concepts and critical data. Analyzing outsourcing in this field becomes imperative. 

The Impact of Outsourcing on the Economy:

When we talk about outsourcing and its implications on a country’s employment, it is important to analyze its impact on the economy. Here are the top ways outsourcing has an impact on the economy:

• On cost efficiency and competitiveness:
  
  The financial impact of outsourcing on an economy is directly proportional to the amount of cost reduction that a business has been able to withstand. Building cost efficiency is one of the primary factors that helps in ensuring cost efficiency. By outsourcing core and non-core activities, accounting firms can reduce operational costs, focus on their core competencies, and increase profit. The cost-saving strategy can enable lowering the prices for the customers and increase competitiveness in the global market. This, not only gives the business, but to the nation, an edge in the global market.  
• On job creation and economic growth:
  
  While the general verdict on outsourcing is that it leads to job loss, the reality is somewhat different. Outsourcing can help create jobs and boost the economic growth of any country. This is applicable to both the home and the host countries. In home countries, accounting firms can reassign different jobs and make way for more strategic roles, fostering innovation and creating higher-value jobs. Similarly, in the host country, outsourcing can help in economic development by providing employment opportunities and enhancing living standards. In a crux, it’s not just one nation or a set of people who benefit from this model. In fact, the implications of outsourcing reach far and wide. 

Debunking the myths around outsourcing:

Myth 1:

There is massive job loss in the US.

The Reality:

The fear of job loss can be massive, especially in the aftermath of a global pandemic and ongoing inflation. However, the impact that outsourcing has on job scenarios is often overstated. Instead of creating job loss, outsourcing makes way for more skilled laborers to improve their standards and quality while working in strategic roles. This helps establish a balance between people working on jobs as per their level. It is all about what is needed and what is actually relevant for your roles. 

Myth 2:

Outsourcing benefits large corporations.

The Reality:

A popular misconception goes that only large corporations benefit from outsourcing. Surprisingly, small and medium accounting firms reap far greater benefits from outsourcing. Besides, helping reduce costs, it also helps them scale up at a faster rate. It allows them to leverage outsourcing to improve efficiency and compete in the global market. Outsourcing is all about efficiency, cost decline, and overall consumer satisfaction. 

Myth 3:

Outsourcing provides poor-quality output.

The Reality:

The concerns around the quality of the output is often considered one of the topmost drawbacks of outsourcing. However, modern outsourcing firms have a team of experts who specialize in their fields. You would find people who are dedicated to performing tasks like bookkeeping, taxation, auditing, etc. There is hardly a situation where one single person is made to perform multiple tasks. This approach helps ensure that the employees are dedicated to adhering to the highest quality standards. They also use advanced communication technology that makes it easier for companies to manage and monitor outsourced services and ensure that the quality doesn’t go for a toss. 

Myth 4:

Outsourcing exploits cheap labor

The Reality:

The impact of outsourcing on any economy isn’t as straightforward as it might seem. The notion that outsourcing exploits cheap labor in developing countries doesn’t take a deep dive into the nitty-gritty. While it is true that the labor costs in countries like India and the Philippines are cheaper when compared with the US, outsourcing creates jobs that otherwise would not exist. These days, outsourcing agreements include provisions for fair wages and working conditions. This is also something ensured by the outsourcing partners at their end. 

Myth 5:

Outsourced jobs are lost jobs. 

The Reality:

When you outsource any task to another country, accounting or otherwise, it becomes your means to get better in the final output with lost cost inputs. This translates to the fact that the clients in the US can avail services or products at a cheaper rate than they otherwise would. This helps small and medium businesses grow to a great extent, helping them raise their standards of living. 

Impact of outsourcing on local talent – Summing up

Outsourcing has a positive impact on local economies. By outsourcing some key functions like accounting and bookkeeping, businesses can invest more in research and development, enhancing the skills of the locals, leading to innovation and the creation of high-skilled jobs. The increase in competition can lead to a higher share of the market and expansion. This helps boost economies.

One of the important factors in mitigating the potential negative impacts is spreading awareness and educating. By investing in education and training, local workforces can adapt to the changing trends in the job markets. Governments and businesses also play a key role in such initiatives. The future of businesses and work is being reshaped. This shift is a new opportunity for local economies to develop new industries and create jobs, less susceptible to being outsourced.

Want to outsource your accounting practice? Write to us at connect@finsmartaccounting.com 

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Problems caused by cultural differences in accounting outsourcing:

The apprehensions of the accounting firms around outsourcing could be based on their personal experiences or from something they have heard. To know the right steps to combat the problems, it is important to dive deep into the challenges.

• Miscommunication and misunderstanding:
  
  The major problem occurs when there is a tendency to assume. It is only human to do so. The lack of clear communication due to lack of time or the assumption that the outsourcing partner simply wouldn’t understand leads to this problem. Between what has been spoken and what has been agreed upon – sometimes there is a gap. This could also happen because the teams aren’t working in the same time zone. Sometimes, teams tend to leave things till the last moment which only ends up making things worse. 

• Language proficiency:
  
  The language proficiency of the outsourcing partner can have a great impact on how clear things appear. If the outsourcing partner isn’t fluent in the language of the clients, expressing their thoughts, ideas, and strategies becomes very challenging. Misinterpretation, due to a lack of proficiency in the language, also leads to inaccuracies in work. The partner might also struggle with problems understanding the questions and feedback.

• The “mum” effect:
  
  In some countries, the concept of hierarchy within the organization is too strong. If the outsourcing partner is based in such a country, they could withhold bad news, fearing the undesirable consequences. In these countries, the concept of maintaining harmony at the workplace, as much as in the personal life is strong. The “mum” effect has a significant impact on a project. If the mistakes and errors do not get resolved on time, they can go unreported, and their impact on the client is severe. When you try to find a resolution at this point, it gets expensive too. 

• Loss of productivity:
  
  Miscommunication can often lead to a lot of back and forth. It leads to errors and then fixing them requires additional time. All of it can hamper the productivity and efficiency of the tasks and the businesses as a whole. Errors due to miscommunication also lead to a loss of valuable time. 

• Cause a strain in the relationship:
  
  With different cultures come different styles of communication. This can cause a significant strain on the relationship with the outsourcing partner and with the clients of the accounting firms. The differences in culture lead to differences in opinions which enhances the way each of them perceives their businesses. 

Tips to manage cultural differences effectively:

Problems arising due to cultural differences continue to be a luring apprehension for accounting firms. But it does not mean that firms cannot manage it the right way. 

• Introduce “cultural fit”:
  
  Right from the beginning of the partnership with the outsourcing partner, introduce the cultural fit. Tell your accounting outsourcing partners about your goals, objectives, and aspirations. While many might think that it is not as important as the budget fit or the expertise of the team, it is all about choosing and building a team that understands you. Understanding the outsourcing partner’s culture also helps build a long-lasting association. It is important to treat them like your own team, rather than an external resource. It helps bring balance and enables the accounting firm paves the path to success. 

• Set clear expectations:
  
  Before you start a project, make sure that you have explained your expectations for the project and the communication in detail with your partnering team. If you need to get something done beyond your scope, it is better to talk to the team in advance to understand their capabilities and bandwidth. Explain your goals and objectives behind every task. You can never overcommunicate. So make sure to have weekly status meetings, and monthly review calls and start a platform where queries can be raised daily. This will help everyone stay on the same page. 

• Keep an open mind:
  
  When outsourcing, always remember that another person’s experience can’t be yours. You will need to acknowledge that everyone has their own thoughts and opinions. You might not agree with everything. But it is important to hear other points of view. You will have a lot of apprehensions about accounting outsourcing unless you have tried it. As you work with global teams, it becomes imperative to embrace differences and see beyond them to make them work. Your outsourcing team’s different perspectives will help you solve a lot of problems that otherwise would have been hard to spot.

• Use tech to your advantage:
  
  The world is coming closer with digitalization. Irrespective of the field, firms seek teams with different perspectives for their firm, which is only possible when you hire employees from different backgrounds. Outsourcing makes it easier. There are various communication tools like Teams, Zoom, etc, and project and program management tools like Monday.com, Asana, etc, that are readily available to help you stay connected.

• Language barriers can be addressed:

Many accounting firm leaders are apprehensive about how well can the outsourcing teams speak English when they outsource to a team in India or the Philippines. Most of the people who will become your team of accountants are fluent in English. They have experience working with international clients who are mostly English-speaking. Besides their expertise, they also know about handling clients across the world. All they need is a little support.

Managing client apprehension in language and culture in outsourcing: Conclusion

In case you are outsourcing for the first time, culture shock can be real. But it does not have to be that way. Cultural differences will always have a significant impact. It is important to note that outsourcing acts as an advantage for accounting firms. While the apprehensions have some truth to them, learning all about handling them the right way will allow us to avoid misunderstandings and conflicts.

Want to know more about how you can benefit by outsourcing accounting? Write to us at connect@finsmartaccounting.com.

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Statistics reveal the gravity of the situation:

• 73% of businesses experience payroll errors, leading to financial repercussions and employee dissatisfaction. (Source: Sage)
• 50% of payroll professionals report spending significant time fixing errors, hindering their ability to focus on strategic initiatives. (Source: American Payroll Association)
• 66% of businesses acknowledge the need for payroll technology upgrades to address growing complexities. (Source: Sage)

Exploring: What Are Payroll Challenges?

Compliance issues with employment tax laws

Payroll processing faces various challenges and one of the challenges in payroll processing is compliance with employment and tax laws. Tax laws and regulations change often, making it hard for businesses to keep track of all the changes. Not following these laws can result in expensive penalties. For example, when tax laws change, businesses may need to adjust the tax amounts taken from employee paychecks. Failure to do so correctly can cause problems for both the employee and the business, leading to underpayment or overpayment issues. Moreover, businesses operating in different states or countries may have different tax laws, and if a company has multiple locations, it must comply with different tax regulations for each area.

Solution to overcome this: Stay informed and updated about tax law updates, to avoid challenges in payroll processing.

Confidentiality issues

Privacy and data protection are very important aspects in this era of technology. Maintaining confidentiality and security of payroll records is crucial. Never share an employee’s personal information without their permission, unless required by a court order. It’s important to prioritize privacy to ensure the safety of sensitive data.

The solution to overcome this: Keep payroll documents safe by storing them in a locked cabinet. Limit access to authorized personnel only to maintain confidentiality within the team. Consider encryption for added protection.

Payroll Professional Shortage

There aren’t enough skilled payroll professionals available due to the high demand in the field. The industry has seen significant growth in the past few years, creating a gap between the need for experienced payroll professionals and the available supply. Finding qualified individuals in this field might be challenging.

The solution to overcome this: Invest in training programs to train payroll professionals. Offer competitive salaries and benefits to retain skilled individuals. Increase awareness about the benefits of a payroll career. Engage in industry networking to identify skilled professionals.

Ensuring Accuracy

Challenges in payroll process involve multiple steps, which include collecting employee data, calculating wages, deductions, taxes, and then distributing payments to employees. Any mistake in this process can result in generating errors that can cause problems for both employees and the employer. For example, if an employee’s salary is not calculated correctly, they may not receive the correct payment, leading to upset employees.

The solution to overcome this: Use reliable systems and maintain accurate employee data. Create a strong system to find and correct mistakes effectively.

Integrating with Other Systems

Businesses might be required to integrate payroll with accounting, HR, or other attendance systems to ensure accurate and timely payroll processing. Integrating different systems for payroll processing can be tough as they can be from different vendors or can have different data formats. Moreover, integrating with other systems can also lead to security issues, especially when sensitive employee data is shared across systems.

The solution to overcome this: Select systems compatible with your payroll setup. Work closely with vendors to set up integrations correctly and ensure data security.

Dealing with Employee Benefits

Payroll and compliance challenges arise particularly when calculating employee benefits, such as health insurance and paid time off, which are crucial parts of compensation and must be accurately calculated. Calculating these benefits can be complex, especially with various options or multiple plans available. When it comes to employee benefits businesses must comply with all applicable laws and regulations.

The solution to overcome this: Implement automated software for accurate benefit calculations and to save time. Stay updated to ensure compliance. Ensure employees understand their benefit options and enrollment processes to avoid confusion and delays.

Managing Payroll for Remote Workers

Handling payroll for remote workers is complex because of different state tax laws and tracking their hours accurately is hard because of their different schedules and time zones. This can cause payment mistakes and make employees unhappy.

The solution to overcome this: To solve this, use payroll software to automatically track hours for remote workers. Create clear rules for tracking time and make sure to keep remote workers’ private information safe to avoid any security issues.

Manual Processes

Relying on manual processes leads to errors and delays in managing payroll for remote workers. Additionally, tracking remote workers’ varied schedules manually results in incorrectness due to different time zones.

The solution to overcome this: Automate payroll processes with technology to improve accuracy and efficiency.

Cost-effective

Challenges in payroll processing arise when balancing the need for efficiency with cost considerations. Managing payroll for remote workers adds complexity, and leads to increasing processing expenses.

The solution to this: Regularly review processes for optimization and consider outsourcing for cost savings.

Technology Adoption

Some businesses avoid adopting new payroll technologies due to unfamiliarity. Switching to the latest payroll technology may initially cause challenges but offers long-term benefits.

The solution to overcome this: Provide training, highlight the benefits of technology, and slowly introduce new tools to ensure a smooth transition.

In Conclusion

Challenges in payroll process involve selecting, configuring, and integrating software solutions, causing difficulties for businesses. Picking the right software can help with payroll problems, but it might be hard for some businesses. Getting help from experts is important.

Contact Finsmart Accounting today for an expert consultation and discover how our expert team can empower you to achieve financial clarity and unlock your business’s full profit with the latest payroll softwares. Contact us at sales@finsmartaccounting.com for any further questions or to discuss your specific accounting needs. 

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The post Overcoming The 10 Biggest Payroll Challenges In 2024 In India appeared first on Finsmart Accounting.

*Enter the concept of hiring outsourced accounting firms* 

Much like using a GPS for unknown roads, these experts help MNCs navigate complexities, ensuring smooth financial operations. In India, however, many organizations remain in the dark about what to expect from these financial wizards. 

Some are even oblivious to things to keep in mind while outsourcing to one. Fear not! In this blog, Finsmart – a leading accounting outsourcing services provider in India – will unveil the mysteries surrounding hiring accounting firms for MNCs. We provide insights that empower you to make informed decisions. 

We bet that by the end, you’ll be equipped to determine whether embracing an accounting firm is the strategic move your MNC needs! 

What Can MNCs Expect from Hiring Accounting Firms in India?

Embarking on the journey of choosing an accounting firm in India holds the promise of transforming MNCs’ financial landscapes. Not only do these experts ease the burden of complex accounting but also bring forth a plethora of benefits. Here are some things you can expect when collaborating  with accounting firms:

1 Expertise and Specialization

Accounting firms in India employ experts with in-depth knowledge and specialized skills. They bring a wealth of experience in handling diverse financial scenarios. They make sure that MNCs benefit from their expertise in navigating intricate accounting challenges specific to both the global as well as Indian business landscape.

2 Regulatory Compliance

The complex regulatory environment in India demands meticulous attention to detail. Accounting firms play a pivotal role in ensuring MNCs adhere to the ever-evolving financial regulations. By staying abreast of changes, they mitigate the risk of non-compliance and help your organization maintain good financial health.

Moreover, accounting firms extend their expertise to navigate the nuances of global compliance. Meaning, your MNC won’t be having any trouble meeting international standards and regulatory requirements. You will be able to foster a seamless and compliant financial operation on a global scale.

3 Cost Efficiency

They say EFFICIENCY is doing things right and EFFECTIVENESS is doing the right things. Accounting firms are about both things! While we will explain to you about effectiveness in upcoming points, let us tell you that they optimize financial processes, enhancing cost efficiency for MNCs. 

Through streamlined operations and resource allocation, these experts will make certain that your financial resources are utilised judiciously. Result? This will contribute to overall cost-effectiveness and improved profitability.

4 Timely and Accurate Reporting

Carson Wentz once said, “Timing and accuracy is really what matters at the end of the day.” We 100% agree with this! Accurate and timely financial reporting is crucial for MNCs to make informed decisions. Accounting firms excel in delivering precise financial reports within stipulated timelines. 

Benefit? This provides organizations with reliable data to facilitate strategic planning and operational decisions.

5 Risk Mitigation

Let’s be honest! Financial landscapes come with inherent risks. Accounting firms are adept at proactively identifying and addressing potential threats. Whether these risks stem from compliance complexities, market fluctuations, or the intricacies of financial operations, they employ comprehensive risk mitigation strategies. 

By doing so, they not only safeguard MNCs from unforeseen challenges but also contribute to fostering long-term stability and resilience in the face of an ever-evolving business environment in India.

Collaborative approaches for MNCs entering the Indian market!

6 Strategic Financial Advice

Another important thing that you need to know about hiring accounting firms for your MNC! These MVPs go beyond routine tasks to offer strategic financial advice. Their insights might enable your organization to make informed decisions, plan for the long term, and navigate financial complexities strategically. 

This also ensures that your financial decisions align with broader business objectives.

7 Focus on Core Competencies

By outsourcing accounting functions to specialized companies, MNCs can concentrate on their core business competencies. This strategic delegation will not only liberate their valuable time and resources but will also empower them to channel their energies into areas where they excel. Put simply, global organizations in India can foster innovation, sustained growth, and heightened competitiveness. 

This approach can literally transform accounting from a potential distraction into a catalyst for organizational excellence.

Is There a Difference Between Hiring and Outsourcing? 

While both hiring an accounting firm and outsourcing accounting services involve seeking external expertise for financial tasks, there are subtle differences between the two methods. For instance, hiring a firm typically refers to engaging the services of a specialized firm that provides a range of accounting services. 

The firm may have a team of professionals with expertise in various financial areas, and they often offer a comprehensive suite of services including payroll management, tax preparation, financial analysis, and more. Talking about outsourcing, in a broader sense, it involves contracting out specific tasks or functions to external service providers. 

In the context of accounting, outsourcing refers to delegating accounting responsibilities to an external entity which could be a specialized accounting firm that focuses solely on handling accounting services for its clients.

Why Finsmart for Outsourced Accounting Services? 

In the intricate realm of accounting and compliance, MNCs often find themselves grappling with the demands of ever-changing tax laws and internal processes. Finsmart emerges as the beacon of efficiency! We have offered seamless offshore payroll services in India for 15+ years. Known for serving 100+ clients, our team of financial experts will alleviate the burden of your accounting and compliance processes. 

Our strategic outsourcing solution will enable you to redirect your manpower toward critical business areas and revenue-generating tasks, improving overall productivity and cost efficiency. 

Here are more reasons to choose us as your accounting and finance management partner:

– Expertise in Regulatory Changes: Our team stays ahead of the curve. It continually trains itself on the latest changes in laws and regulations. Benefit for your MNC? This ensures that your organization also remains in compliance with the dynamic financial landscape of India.

– Comprehensive Scope of Services: Finsmart offers end-to-end payroll and accounting outsourcing services tailored to the specific needs of Indian businesses. From meticulous accounting entries to reconciliations and monthly financial data closing, our services cover the entire financial spectrum.

– Efficient GST and TDS Compliance: Finsmart excels in navigating the complexities of Goods and Services Tax (GST) and Tax Deducted at Source (TDS) compliance. Our expertise in these areas guarantees accurate and timely submissions. We can mitigate the risk of penalties.

Learn about the cost of outsourcing accounting services in India!

– Detailed Management Reports: Beyond basic accounting functions, we also provide global organizations in India with insightful management reports. These offer a comprehensive view of cash flows and profitability, empowering decision-makers with the data needed for strategic planning.

– Resource Reallocation for Business Growth: By outsourcing to Finsmart, MNCs in India can strategically reallocate their employees to critical business areas. They can foster innovation and growth. 

Hiring Accounting firm for MNC in India: Final Words

There you go! 

We told you everything important about hiring an accounting firm for your MNC in 2024. As you navigate the complex landscape of financial management and compliance, Finsmart stands ready to streamline your processes, ensure regulatory compliance, and fuel your business growth. 

By having us on your side, you not only gain a trusted accounting ally but also unlock the potential for innovation, profitability, and sustained success! Got any queries to ask? Send them to sales@finsmartaccounting.com and have them answered by our experts. 

Also, don’t forget to check out:

Accounts receivable outsourcing services

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The post Accounting Firm for MNCs: What to Expect and More appeared first on Finsmart Accounting.

More and more Indian businesses are gaining access to a diverse team of accounting professionals rather than counting on the neighborhood accountant. However, a lot of entrepreneurs are still missing out on the benefits. 

On that note, Finsmart Accounting – one of the best outsourced accounting services providers in India – decided to share why hiring a professional accounting firm is a long term win. Read on!

Benefits of Hiring a Professional Accounting Firm

Read on to discover the many benefits of engaging an accounting team: 

Navigating Complexity with Expertise

From tracking revenues and expenses to complex tax codes and ever-changing regulations in India, the accounting demands are manifold. Professional accounting firms are home to a team of skilled experts who possess up-to-date knowledge and insights, ensuring accurate financial reporting and compliance.

By engaging a reputable accounting firm, businesses gain access to a wealth of experience and expertise. This expertise becomes valuable when managing tax obligations, minimizing financial risks, and optimizing resource allocation. Moreover, the comprehensive insights offered by accounting professionals empower businesses to make informed decisions, capitalizing on growth opportunities, and navigating challenges with confidence.

Strategic Financial Planning

A professional accounting firm is more than just a tool for historical record-keeping. With their thorough understanding of a business’s financial health, accounting firms can collaborate with business owners to devise prudent financial strategies. They analyze historical financial data to identify trends, assess the viability of potential investments, and help establish achievable financial goals.

Strategic financial planning is especially vital for Indian businesses seeking to scale up. By aligning financial objectives with broader business goals, professional accounting firms like Finsmart Accounting enable businesses to chart a course for long-term success.

Ensuring Regulatory Compliance

Staying compliant with the ever-evolving landscape of tax regulations and financial reporting standards can be a daunting task for Indian businesses. Failing to adhere to these regulations can result in legal repercussions and financial penalties. Professional accounting firms are well-versed in the latest tax laws and regulatory requirements, ensuring that businesses remain on the right side of the law.

By entrusting regulatory compliance to experts, businesses can focus on their core operations without the constant burden of keeping up with changing regulations. This proactive approach not only safeguards a business’s reputation but also preserves its financial stability in the long run.

Optimizing Resource Allocation

Efficiently managing financial resources is at the heart of sustainable business operations. By closely monitoring income and expenses, accounting professionals help optimize cash flow, ensuring that funds are available when needed for critical expenditures and investments.

Moreover, these experts assist in allocating resources strategically. They analyze the financial implications of different choices, helping businesses determine the most profitable paths forward. Whether it’s deciding between purchasing new equipment or leasing it, expanding operations or focusing on consolidation, or evaluating the financial viability of new projects, accounting firms provide data-driven insights that enable informed decision-making.

Comprehensive Approach to Financial Health

One of the most significant advantages of hiring a professional accounting firm is the holistic approach they bring to managing a business’s financial health. These firms provide an array of services beyond traditional bookkeeping, including financial analysis, budgeting, forecasting, and risk assessment. This comprehensive approach allows businesses to proactively address challenges and seize opportunities.

Accounting firms can perform in-depth financial analysis to identify trends and patterns, helping businesses pivot their strategies as needed. This agility is crucial in today’s rapidly changing business environment, where adaptability can mean the difference between success and obsolescence. This is not something an coountant can accomplish on his or her own!

Time and Focus for Core Competencies

For  Indian business owners, time is a precious resource that must be allocated judiciously. Engaging a professional accounting firm liberates entrepreneurs from the complexities of financial management, enabling them to redirect their attention to core business functions. This focus on core competencies enhances productivity and innovation, driving business growth.

Outsourced accounting services also eliminate the need for businesses to hire and manage an in-house accounting team. This not only saves on recruitment and training costs but also ensures consistent and reliable financial management without the burden of staff turnover. As a result, business owners in India can channel their energy toward strategies that fuel expansion and competitiveness.

Hiring Professional Accounting Service: Conclusion 

In the fiercely competitive landscape of modern business, the decision to hire a professional accounting firm is far from a mundane administrative choice—it is a strategic investment with profound long-term implications. By collaborating with a professional accounting firm, businesses can establish a solid financial foundation that fosters resilience and sustainability. 

Got any queries to ask? Send them to sales@finsmartaccounting.com and have them answered by our accounting experts! 

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The post Why Hiring a Professional Accounting Firm Makes More Sense? appeared first on Finsmart Accounting.

The blowback from the coronavirus and now the ongoing war between Russia-Ukraine triggered a global economic slump in 2022. Young entrepreneurs, especially those who are running new ventures, are finding it difficult to hit sales targets and invest in new products. No wonder, a lot of them are looking for ways to make their business recession-proof.

Since independence, India has come across five recession periods. While it is also true that recessions are hard to forecast with accuracy, it’s possible to keep the business afloat and possibly even thrive through the economic crisis. But the question is how?

Maanoj Shah – Director of Growth, Strategy, and Alliance at Finsmart Accounting – recently shared insights to help young startups become recession-proof. Shared during a conference, these ideas have helped startups active in diverse industries during recent slumps and could probably help you as well.

Are you ready to go through tips and ideas to make your business recession-proof? Let’s go!

#1 Make Cash the King

Jack Welch once said, “Cash is king. Get every drop of cash you can get and hold onto it.” Turns out, the key to surviving a recession is to build up your emergency cash reserves. That way, you can keep your head above water while procuring supplies, retaining employees, and maintaining business tools and equipment in the sea of economic crisis.

Reserve at least 18-24 months of expenses in cash. Evaluate all business expenses and mow down the ones that aren’t helping your startup to make money. Relook your strategy if your business is showing signs of slowdown during the recession. Right size your overheads to ensure you have a healthy cashflow reserve to ride over this 18-24 months,

#2 Stay Bottomline Focused

When going is good and the economy is booming one can go after the top line but it’s good to always stay bottom line focussed especially in slow or recession times. Relook at all your products SKUs and service offering to make sure “ALL” are generating positive returns adding to the bottom line. Don’t hesitate to slow down or discountine certain product line if its adversely affecting and not adding to the bottom line.

#3 Look at Unit Costing

The best way to look at your Product P & L is by drilling down into every aspect of unit cost. Look for opportunities for savings or renegotiating with vendors on each line item of the Product or Service P & L. If you cannot afford to run all the product lines the best way is to look at the unit economics and decide which one isn’t giving the benchmark returns based on that you can strategize your business plan.

Useful invoice management tips and solutions for modern-day businesses 

#4 Run a No-frill Business for a Couple of Years 

While some recessions last a year or two, others can drag on for long periods. Hence, the next Finsmart advice for entrepreneurs is to run no-frill startup businesses for a couple of years till the market picks up again.

It will be good to look at every feature of your product and service and identify any frills that can be removed without impacting the customers. Further look at your overheads, general and staff welfare to see if there are any opportunities to downsize or reduce the expenses on that. Remember every buck counts so look at even the smallest opportunities of savings together it can become a sizable one.

#5 Don’t Delay Decisions 

A wrong decision isn’t forever; it can always be reversed. However, the losses from a delayed decision are forever. A lot of times, young entrepreneurs take a lot of time to implement hard decisions. This can turn out to be a real issue during a recession.

Don’t delay your business decisions be it cutting down cost or trimming down people size or removing certain frills, Identify the potential of an opportunity and take account of possible outcomes. Remove emotions and focus on the single dimension to keep your startup afloat till the recession curve tapers off.

#6 Don’t Hesitate to Right-Size, Down-Size, or Pause Few Product Lines

Its extremely critical decision when it comes to discontinuing a product line or downsizing people or infrastructure. But in times of recession dont think that is a permanent decision, all these are temporary decisions to ensure your start-up floats and if you survive then you can thrive.

So, don’t hesitate to downsize your office or any other infrastructure for preserving cash. Take care of short-term cash flow first. It will allow you to learn how much money needs to move out of your business, at what time it should be paid, and whether your forecasted income will cover the ongoing expenses.

#7 Communicate More Often

Experienced entrepreneurs know the importance of communication but it becomes more mission-critical in the midst of an economic crisis. A few people in your staff may feel insecure and will be looking for reassurance through the recession storm. That’s why maintaining healthy communication is important.

Have frequent and honest talks with them – not only about intended business changes but also about the importance of wellness during times of stress. Also, explain the cash effect of every harsh business decision made. That way, you will be able to make certain that employees are aware of the reasoning behind business decisions.

#8 Ensure Your Finance Team Gives Right Numbers and Forecasts Week to Week 

Cutting down your expenses isn’t enough. You also need to understand where your business stands financially. Keep a sharp eye on numbers. Ask your finance team to give you complete clarity on cash flow on every decision you make along with numbers of profit margins, inventory, and monthly sales.

Tell the finance team to give you a weekly or monthly financial report. Review numbers involved with the report thoroughly and have a detailed discussion with the management on each P & L product. Reviewing your cash flow frequently will make sure that short and long-term financial goals are not missed during the recession.

#9 Keep Your Debt to Minimum 

While you continue to build cash reserves for your business, it is also essential to make at least the minimum payments on your debts during a recession. Why do you ask? Because this recession-proof business idea can help you prevent late fees and potential damage to your credit scores.

Consider these tips for keeping your debt to a minimum:

• Don’t take extra debt if you don’t need it, as it will have an interest outgo.
• Prevent huge detrimental impacts on cash flow by re-looking into customer funding models.
• Renegotiate with your clients for early payment terms to secure your working capital and prepare for a recession.

Hire leading accounting and payroll service providers for Indian SMBs. 

#10 Re-visit Your Investment Plan 

Our guide to making a business recession-proof will be considered incomplete without this tip. It is important to have an investment plan in place but it is even more important to revisit it regularly. Circumstances change rapidly during an economic crisis. Hence, adapting your plan to match a change in financial situation will help your business stay afloat.

Become cognizant of the current market scenario and evaluate the necessity. Understand your customers’ needs by asking questions related to product preferences. Also, delay the plan of investing your money into any new product or service until the economy recovers from the recession.

Recession-proof Business: Final Words

As we said earlier, recessions are inevitable. However, startups can come through with minimal damage by planning ahead. With that said, our guide to making your business recession-proof ends. We are certain that the above steps will prepare your startup better to survive any economic climate.

Got any queries to ask? Send them to info@finsmartaccounting.com and have them answered by our team of finance experts.

Also read:

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The post 10 Steps to Make Your Startup Recession-proof: Maanoj Shah appeared first on Finsmart Accounting.

The responsibilities of the accounts management team

The accounts management team has the respective responsibilities, which are crucial and even more vital than any other department in the organization. That is because money plays a pivotal role in the running of any business. If it can be handled and maintained correctly, then the growth would be faster. In this growth, the accounts team has some responsible roles to play, such as-

• First of all, the responsibilities of the budget in different purposes and handling of them methodically belong to the finance part of the accounts team.

Discover month-end closing checklist for businesses of all sizes

• It verifies the needs of the organization and proposes the acts to be taken accordingly.
• At the same time, it controls expenses and makes them meaningful to reduce the unnecessary costs of the company.
• They should maintain the dues and pending amounts attentively so that they don’t cause a loss to the company.
• The accounts and bookkeeping services are related to each other. So, bookkeeping is also another responsibility for the accounts team of some company.
• It should also maintain the consolidated records of the earning, profits, and expenses to analyze the yearly growth of the organization.

The outsourced accounting services are too smart to handle all these matters. Mostly, in the case of bookkeeping services, these service providers have gained immense popularity.

The concept and the works of the outsources accounting services.

The concept of the outsourcing companies for accounts is comparatively new than the in house accounts services. You can even outsource the accounts services for your business that would provide smarter guidelines for the does and don’ts in your industry. There are many companies, which are outsourcing accounting services to India.

• First of all, the outsourced accounts and bookkeeping services, save a lot of time and money of the organizations, especially the small business owners.
• These provide overall consolidated solutions on the matters of accounting and bookkeeping services, for which you may need an entire team to hire for a full time with all the employees’ facilities.

Accounting definitions and terms for small businesses

• This service uses the topmost and latest technology to execute the accounts works for the clients. So, there are preciseness and perfection at the same time in their works. A simple accountant or accountant team may not afford it in this manner.

Fins smart is an accounting outsourcing company, which smartly offers outsourced accounting services to its clients, especially the small business owners.

If you are looking for an Accounting Partner and not sure which Accounting and Bookkeeping company can be a right choice, then read our blog Factors To Consider While Choosing Your Accounting Outsourcing Partner.

Also, learn about our services:

Offshore bookkeeping services in India

Accounting outsourcing in India

Accounting and payroll services in India

The post What Exactly Should You Expect From Your Accounting Team? – Finsmart appeared first on Finsmart Accounting.