Improving Key Accounting Processes for a More Efficient and Profitable Business

As a business owner, you don’t need to be an accountant because you have people like me that will do that for you — but you do need to understand how your accounting processes work so you can improve efficiency. Strong accounting processes help you control cash, prevent fraud, stay compliant, and make better decisions because your financial data is accurate and shows you exactly how the business is performing. Weak processes cost money, create risk (i.e. I.R.S. Audits), and distract you from growing the business because your employees’ time is being wasted.

So, let’s give you a crash course to get you back on top of this subject! Below is a practical overview of the main accounting processes in a company, how to make each one efficient, and how to properly separate responsibilities so no one person has too much control.

ACCOUNTS PAYABLE (Paying Bills)

Purpose:

Accounts Payable (AP) ensures vendors are paid accurately and on time while protecting your cash.

How to Make It Efficient:

- Use electronic invoices and approvals instead of paper. Programs like Bill.com can help shave a good amount of time off the AP process!

- Set approval limits (for example, managers approve up to a certain dollar amount). Again, we are putting the control into the management and executive team when we set spending limits.

- Pay vendors on a regular schedule rather than randomly. This incorporates the “Time Value Of Money” concept where the longer we can hold on to dollars, the more purchasing power/interest we create for ourselves.

- Keep vendor information centralized and controlled. Being able to refer back to invoices or compare the amount of vendors in a specific space, the cleaner we keep our electronic file cabinets, the better.

Segregation of Duties:

- One person enters bills.

- A different person approves payments.

- A different person releases payments or signs checks.

- Bank reconciliations are done by someone not involved in paying bills.

ACCOUNTS RECEIVABLE (Getting Paid)

Purpose:

Accounts Receivable (AR) ensures you bill customers correctly and collect cash quickly to maintain a healthy cash flow.

How to Make It Efficient:

- Send invoices automatically from your sales or billing system. All aspects of the AR process can be performed electronically anymore. Systems such as QuickBooks Online are connected to Merchant Services so you can send and collect on an invoice electronically.

- Review unpaid invoices weekly. This will help you catch lingering AR and increase the speed of which you collect the cash.

- Follow up early on overdue balances. There’s no waiting! If they agreed to pay by a certain date, then the money should be in the bank.

Segregation of Duties:

- Sales should not approve customer credit.

- Invoicing should be separate from collecting cash.

- Cash posting should be separate from collections.

- Someone independent should review AR reports.

PAYROLL

Purpose:

Payroll ensures employees are paid correctly and on time and that taxes are handled properly.

How to Make It Efficient:

- Use a reputable payroll system or provider. Platforms like Gusto.com are great as they can connect directly to your accounting system, book all necessary entries, and provide a seamless process for your payroll expert.

- Automate time tracking and approvals. There are plenty of apps on the market that can make this process smooth for you and your employees.

- Use a payroll calendar and stick to it. From managing cash flow to your employees ability to rely on their paychecks, this accounting process trumps all other processes.

- Review payroll reports before every run. Until AI takes over the world, humans make mistakes and because of the importance of this accounting task, add another human to the mix.

Segregation of Duties:

- Hiring and pay changes handled by HR or management.

- Payroll processing handled separately.

- Final payroll approval done by the owner or senior leader.

- Payroll bank account reconciled independently.

MONTH-END CLOSE & GENERAL LEDGER

Purpose:

This process pulls all financial activity together so you can see accurate financial results.

How to Make It Efficient:

- Use a monthly close checklist. If you just have a bookkeeper on staff, you are missing THE main reason why accounting exists…to have the story told to you, from a trained accountant. A Controller or CFO will put together the monthly accounting processes that eventually end up in your hands as meaningful reports to run your business from.

- Close AP, AR, and payroll before final reporting. Your Controller “controls” the stages of the books and all transactions should be reconciled and answered before any financial statement publication occurs.

- Use standardized journal entry templates. Programs like QuickBooks Online, allow the Accountant the ability to create recurring transactions which cut down on data entry time.

- Focus on material items that matter to the business. Pennies no longer exist, treat your accounting that way! Yes, we want the books to accurately reflect the condition of your company, but we aren’t going to chase nickels.

-Improving this accounting process is important in the overall amount of time spent on accounting at your company.

Segregation of Duties:

- One person prepares journal entries.

- Another person reviews and approves them.

- Account reconciliations are reviewed by management.- System access is restricted.

FINANCIAL REPORTING

Purpose:

Financial reporting tells you how your business is performing and supports tax filings, lenders, and investors. This is where it all comes together in terms of whether you have what it takes or not to last. I have seen companies literally go belly up simply because they didn’t have financial statements to support some aspect of the business (tax penalties and back taxes).

How to Make It Efficient:

- Use consistent reports each month. As an owner, you want a cadence with your accounting. A Fractional Controller/CFO should be sending you a financial package each month containing all relevant financial statements and the key indicators of your business.

- Automate reporting where possible. Programs such as Reach Reporting make it easy to connect an accounting software to a financial statement analysis software that will give insights to drive decision making.

- Review results monthly, not just at year-end. If you aren’t measuring month to month, you will end up somewhere you didn’t want to be.

- Document key accounting policies. The accounting policies back up the foundation of your accounting.

Segregation of Duties:

- Reports prepared by accounting.

- Reviewed by the owner or leadership.

- Changes controlled and documented.

FIXED ASSETS

Purpose:

Tracks large purchases like equipment, vehicles, and technology. This is not only needed for tax purposes but also measuring your return on those assets.

How to Make It Efficient:

- Set a capitalization policy. You don’t want to put $5 transactions on the Balance Sheet! Once a purchase hits $2,500, then you can move that expense to the Fixed Asset section.

- Maintain an asset list. Again, this backs up your asset accounts but also works as an inventory list of everything you own.

- Automate depreciation. Setting up Excel schedules will help to create a clean depreciation entry monthly.

- Review assets annually. Write off what you no longer have!

Segregation of Duties:

- Purchases approved by management.

- Assets recorded by accounting.

- Disposals approved separately.

- Asset records reviewed periodically.

FINAL TAKEAWAY

Improving accounting processes protect your cash, reduce risk, and give you better visibility into your business. You don’t need a large finance team — just clear processes, basic controls, an accountant that knows what they are doing, and the right separation of responsibilities.

Strong accounting lets you focus on what matters most: growing your business.

If you are a small to mid-size business owner and desperately need help with your accounting processes and overall value to the business, message me on the contact page!

Golden Pathway Accounting