Potential Accounting Decisions You May Have to Make Soon
In today’s ever-changing business environment, staying ahead often means rethinking your approach to accounting, well beyond tax season. Whether you’re planning to grow, streamline operations, or simply gain better clarity on your finances, there are key decisions you may need to make in the near future. Here’s what to keep on your radar as you look to strengthen your financial foundation.
Adopting or Upgrading Accounting Software
As your business grows and changes, so should the tools you use to manage it—and accounting software is no exception. What might have worked well in the early stages of your business may now be creating more headaches than solutions. Manual data entry, limited reporting capabilities, and a lack of integration with other systems can slow you down and increase the risk of costly errors. That’s why adopting or upgrading your accounting software is one of the most strategic financial decisions you can make.
Modern accounting platforms offer a wide range of features designed to simplify day-to-day tasks while giving you greater visibility into your financial health. Cloud-based systems, for example, allow for real-time access to your data from anywhere, making remote work and on-the-go decisions more seamless. Many platforms now include automation tools that handle everything from invoicing and payroll to bank reconciliations and expense tracking, reducing the need for repetitive manual processes and increasing accuracy.
Another major advantage of upgrading is the ability to integrate your accounting software with other systems you rely on, such as your CRM, point-of-sale, or inventory management tools. This kind of integration not only saves time but also ensures consistency across departments, which is essential for making informed decisions. For businesses dealing with inventory, job costing, or complex project billing, choosing a system that supports these functions can make a meaningful difference in efficiency and clarity.
Security and compliance are also important factors. Older systems may lack the protections needed to safeguard your sensitive financial data or keep up with changing regulatory requirements. Upgrading your software ensures you're operating with the latest security features, such as data encryption, secure user access, and automatic backups. This added peace of mind is especially valuable if you’re preparing for future audits or planning to seek outside funding.
Finally, the decision to adopt or upgrade accounting software should come with a plan for training and implementation. Even the best platform won’t be effective if your team isn’t confident using it. Look for systems that offer strong customer support, onboarding assistance, and scalability so you can adapt as your needs grow. With the right tools in place, your accounting function can move from being reactive to truly strategic, supporting better decisions, smoother operations, and long-term success.
Reviewing Your Financial Reporting Structure
Financial reports are more than a summary of your numbers—they’re a reflection of your business’s health and direction. Yet many business owners stick with default templates or legacy reporting practices that no longer serve their current needs. As your company grows, so do the complexities of your finances, and your reporting structure needs to evolve alongside them. Reviewing and updating your financial reports ensures you’re seeing the right data, at the right time, in a way that supports sound decision-making.
Don’t Provide Actionable Insight
One of the most common challenges businesses face is that their financial reports are too high-level or too generic to provide actionable insight. You might be generating income statements and balance sheets, but if they don’t tell you how individual departments, products, or services are performing, they’re not helping you manage your business effectively. Modern financial reporting should allow for segmentation and drill-downs, giving you the ability to analyze performance by location, team, or initiative.
What Metrics Matter?
A key part of reviewing your reporting structure is determining which metrics actually matter to your goals. For instance, if cash flow is a concern, then having rolling forecasts and detailed cash flow statements may be more critical than focusing solely on profit and loss. On the other hand, if you’re preparing for funding or investment, reports that highlight growth trends, gross margin stability, and customer acquisition costs may be more relevant. Your reporting should be aligned with both your short-term needs and long-term strategic objectives.
Technology
Technology plays a major role in reporting improvements as well. Today’s accounting systems can automate much of the reporting process, pulling real-time data and generating visual dashboards that make trends and outliers easy to spot. If you’re still exporting spreadsheets and compiling reports manually, you're not only wasting time but also increasing the likelihood of errors or inconsistencies. Upgrading your tools or customizing your existing software can unlock better reporting with far less effort.
Recurring Reviews
Finally, reviewing your financial reporting structure isn’t a one-time task—it’s a recurring best practice. Set a schedule to reassess your reporting needs annually or whenever your business model shifts significantly. By staying proactive, you ensure that your financial reports continue to offer clarity, context, and confidence as you make decisions. When your reports are working for you, not just checking boxes, you gain a powerful advantage in navigating whatever comes next.
Reassessing Cost Structures and Profit Margins
Understanding your cost structure and profit margins is essential for making informed business decisions, yet many businesses operate on assumptions that no longer reflect reality. Expenses evolve over time, and profitability can shift without clear warning if not consistently monitored. Reassessing your cost structure and margins is a proactive way to maintain financial health and ensure your pricing and budgeting strategies are still aligned with your goals.
Fixed and Variable Costs
Start by taking a deep dive into both your fixed and variable costs. Fixed costs like rent, insurance, or software subscriptions might stay relatively stable, but variable costs, such as raw materials, shipping, or labor, can fluctuate due to market trends or operational changes. Even small, incremental increases in these areas can erode margins if they go unnoticed. By evaluating these numbers regularly, you can pinpoint inefficiencies, identify unnecessary expenses, and prioritize where to reduce or reallocate spending.
Pricing Strategy
This is also an opportunity to reevaluate your pricing strategy. Are you charging enough to maintain healthy margins? Have competitors changed their pricing? Are rising costs eating into your bottom line? Reassessing your cost structure allows you to understand if your current pricing is sustainable, or if adjustments are needed to reflect the true value and cost of your offerings. In some cases, this may mean raising prices, but it could also mean bundling services differently, streamlining operations, or shifting focus to more profitable segments.
Profit Margin
Profit margin analysis goes hand in hand with this review. Gross profit margin gives you insight into how efficiently you're producing or delivering your products or services, while net profit margin shows your overall profitability after all expenses. Both metrics are essential for understanding your financial performance. If margins are shrinking, it’s important to uncover the “why” and determine whether the issue lies in production costs, pricing, operational inefficiencies, or market shifts.
Software
Technology can also assist in this process. Accounting software with cost-tracking and margin analysis tools can give you a clearer view of profitability by product, service, or client. This level of detail helps you make smarter choices about where to invest, where to cut back, and how to optimize your operations.
Ultimately, reassessing your cost structure and profit margins isn’t just about cutting costs—it’s about making your business more efficient, more agile, and better prepared for long-term success. By keeping a close eye on these metrics, you can adapt to changing conditions with confidence and make decisions that truly support your financial goals.
Revisiting Your Chart of Accounts
Your chart of accounts is the backbone of your financial recordkeeping—it organizes every transaction into categories that shape your financial reports. But as your business evolves, what once worked may no longer fit. A bloated, outdated, or overly complicated chart of accounts can make it harder to track performance, budget accurately, or spot financial trends.
1. Confusion During Month-end Reviews
One common sign that it’s time to revisit your chart of accounts is confusion during month-end close or report reviews. If you or your team are unsure where certain expenses belong or if the same type of transaction is being coded to multiple accounts, it’s likely that your structure needs refinement. A well-organized chart should offer clarity and consistency, not questions.
2. Expanding Your Services
Businesses often outgrow their original setup. As you expand your services, hire more staff, or enter new markets, your accounting needs become more nuanced. You may need to introduce new accounts, consolidate others, or create subcategories that better reflect your operations. For example, separating marketing expenses into digital and traditional categories can help you see where your outreach is most effective.
3. Alignment with Current Goals
Revisiting your chart of accounts also ensures alignment with your current goals and reporting requirements. If your leadership team or investors request specific financial views, like tracking costs by project or department, your chart should be structured to support those needs. With the right framework, you can easily generate meaningful reports without hours of manual adjustments.
4. Consistency
Finally, cleaning up your chart of accounts helps with consistency across your financial processes. When everyone on your team is working from the same playbook, it reduces errors, streamlines training for new staff, and improves the accuracy of your budgeting and forecasting. Taking the time to update your chart now sets the stage for smoother operations and better financial insights in the long run.
Strengthening Internal Controls and Audit Preparedness
Strong internal controls are essential for protecting your business, regardless of size. While small businesses might assume that formal controls or audit readiness are only necessary for larger organizations, the reality is that any company can be vulnerable to errors, fraud, or financial mismanagement without the right safeguards in place.
Internal controls are the checks and balances within your financial processes. These include separation of duties, approval workflows, access restrictions, and regular reconciliations. For example, the person who processes payments shouldn't be the same person who approves them. Even simple changes like requiring dual sign-offs for large expenses or regularly reviewing bank statements can go a long way in preventing issues.
Establishing a clear process for financial documentation is also a key part of both internal control and audit readiness. Keeping thorough, organized records—such as receipts, invoices, contracts, and payroll documentation—not only helps maintain transparency but also speeds up the process if your business ever undergoes an internal review or external audit.
Preparing for an audit doesn’t mean anticipating something going wrong—it means ensuring your business is healthy, accountable, and equipped to demonstrate compliance if needed. Regular internal reviews can help you spot problems early, improve accuracy, and show stakeholders that you take financial integrity seriously.
By investing in stronger internal controls now, you’re building a foundation of trust—within your team, with your vendors, and with any potential lenders or investors down the line. It’s not just about avoiding problems; it’s about running a smarter, more secure business.
Conclusion
The accounting decisions you make today can shape the strength and stability of your business tomorrow. Whether it’s upgrading your software, refining your reports, or tightening internal controls, being proactive puts you in control of your financial future. At Hasenbank Accounting Services, we’re here to help you navigate these decisions with clarity and confidence, so you can focus on what you do best: running your business.
Hasenbank Accounting Services provides remote accounting support to Managed Service Providers and IT businesses. With over 27 years of accounting experience and 23 years supporting the IT industry, we are focused on making the financial aspects of your MSP business one less thing to worry about. Contact us today to see how we can help you.