Most of the time, when you hear the words “required” and “recommended,” one seems more imperative than the other. Rest assured, this is not the case with your accounting system. Although producing the right reports to comply with tax filing requirements is required, fully utilizing appropriate accounting systems, oftentimes overlooked or underutilized, is just as important to establish a strong financial and business footing.
When you’re expanding a business, whether by location, business activity or product lines, your accounting system should be set up to produce three pieces of key information:
- Financial reports that highlight performance profitability by state, county, profit center, product line or business activity
- Comparative financial reporting (i.e., current period to year-to-date, current year to prior year and actual activity to budgeted activity) that can help to show trends
- Timely reports that help management and financial professionals with tax planning and tax minimization strategies
Required Tax Reporting for Expanding Businesses
Your accounting systems should be selected and customized to generate the required information that will help to satisfy your specific income tax, sales tax and property tax reporting requirements, including:
- Revenues and expenses by state for income tax allocation purposes
- Revenues by county and further by taxable and non-taxable income components for sales tax reporting purposes
- Keeping track of fixed assets and inventory by location
Recommended Accounting Report Customization for Expanding Businesses
While setting up your accounting software to inform your expansion strategy is said to be ‘recommended,’ for a company in growth mode, understanding the profitability and productivity of operations by location, product line, profit center and business activity is key to successful strategic planning. These numbers are the intelligence necessary for management to analyze factors like operations, revenues, expenses, overhead allocation, profit/loss and income tax projections. The information enables management to make comparisons and plan strategy around actual performance data each month, quarter or year.
Engaging the Proper Accounting Software
There are a number of accounting software options, and each is built with vast capabilities as well as potential limitations. The upside is that these systems can produce virtually any report your business needs, even as it grows in complexity. The downside is that most systems go woefully underutilized because most businesses can’t identify or understand how to use the features properly.
We know as well as you do that understanding, buying, implementing and managing a customized piece of accounting software is probably not what you’re inclined to focus on as you’re working toward expansion. Nevertheless, for a growth-mode company, what happens at the planning end of an expansion is vital to sustainable performance. Setting up systems to capture and allocate the right information ensures you can satisfy reporting requirements on demand, and keeps you from having to find and assemble historical financial information.
How to Find the Right Accounting System Solution
A tax and accounting advisor familiar with the various accounting software options and capabilities can make sure you are employing the right system – and properly. They’ll begin by working with you to clarify current and strategic priorities, requirements, and custom reporting needs.
That information informs the accounting software selection. It is a significant investment of time, but the right accounting solution will meet your immediate needs and have the capacity to evolve and scale with you. Once selected, the software must be customized to ensure that key information like a chart of accounts, inventory customization and currency conversion is integrated within your reports. The process of identifying, setting up, training internal accounting staff, securing and assigning management roles, and putting use of reports to meet the required and recommended uses requires a partner adept at using the technologies to take a growing company to the next level.
S.J. Gorowitz Accounting and Tax Services, P.C. specializes in the unique needs of expanding and emerging businesses. It’s what we have done for decades. As technology has continued to become more and more a part of the accounting equation, we have continued to keep our clients on solid footing by identifying and employing the best tools for their growing needs.