Accounting challenges are pervasive.
Even after life is regaining normalcy slowly in 2021 after grappling with the coronavirus pandemic and all that entailed, finance and accounting teams are practicing caution as challenges and changes have become features of today’s business world.
Due to the pandemic, the revenue interruptions and unexpected supply chain disruptions in 2020 due to the pandemic were a wake-up call for companies to leverage technology for all aspects of their business operations, including accounting. Some accounting challenges have always been pervasive and pressing. But unexpected circumstances such as a pandemic can bring about new ones, along with huge financial losses.
So, it becomes essential for companies to build their adaptability. The first step would be to become more aware of the various accounting challenges that are prevailing currently. The next step would be to take practical steps to overcome them. Let’s discuss them in detail here.
#1 Cash flow
The focus of most boardroom meetings has now shifted from earnings before interest and taxes (EBIT) to cash flow because economic hardship is likely to persist for a while. Cash management assumes a critical position more than before as companies are more cautious about their capital expenditures. Most have implemented cost containment to improve liquidity and deferred planned investments.
Solution: Now is the time for companies to make their accounts payable and receivable processes more efficient to generate a steady cash flow. Metrics like past-due invoices, operating cash flow, and expenses are key informers of the cash flow position, and companies should consider tracking them for making informed decisions.
#2 Talent acquisition and retention
Identifying, hiring, and retaining good talent isn’t a new challenge for the business world. Given the changes that have come about, hiring for finance and accounting roles in healthcare, technology, financial services, property management, and cash accounting has become more challenging. Also, retaining top talent is becoming more difficult because of low morale, burnout, and competition.
Solution: Companies should consider expanding their search to identify remote workers who can perform jobs related to collections and billing. Also, it’s recommended to take active measures to implement employee retention strategies that would boost the morale of finance and accounting teams.
#3 Financial reporting
Both private and public companies are affected by the stringent financial disclosure requirements prescribed by the SEC. Let’s not forget, accounting teams have been tackling the new revenue recognition, CECL, and lease accounting standards for a while. Compliance with reporting requirements became a concern for financial leaders, especially when stimulus programs of the government related to COVID-19 push for proper audit documentation.
Solution: The regulatory landscape is a dynamic, ever-changing one. There will be a slew of compliance requirements that accounting teams can learn about from professionals. Staying abreast of financial reporting requirements and standards in today’s times is key to avoiding penalties and fines.
#4 Changes in taxation laws
Accounting teams dread tax law due to its numerous complexities. In 2021, it was announced that tax practitioners would have to know about 5,600 pages of the latest provisions added to the Consolidated Appropriations Act or the COVID-19 stimulus.
Solution: Accounting teams will have to navigate changes in taxation law by adopting accounting software for keeping digitized, easy-to-access, and accurate financial records. They will have to take out time to understand total tax liability and adapt to shifting trade and tax policies.
#5 Upskilling
The pandemic has ushered in an era where technology is at the helm of the business ship. Work-from-home routines have led companies to embrace various software tools that help them carry out their operations. So, building an accounting team adept at necessary financial technologies is a challenge pressing on companies of all types.
Solution: It’s time for accounting departments to boost existing expertise and skills through skill development training to create a win-win situation for employees and the business. Cloud-based payroll, HR information systems, ERP systems, financial forecasting and modeling, automation, and AI-based data analytics have become focus areas for companies that want to keep pace with changes in the landscape.
#6 Payroll management
Payroll has always been a challenging aspect for accounting and HR, given the ever-changing regulations and laws. Changes are on the horizon both at the federal and state levels. Amidst all these, it’s a chore for payroll managers to manage information and withholdings of employees working from different locations. There’s also a new complexity for determining primary work location as state income taxes have become more difficult to manage.
Solution: The best approach for companies now is to automate all their payroll processes. Various cloud-based payroll tools assist teams with all employee calculations. From earning and tax deductions to company contributions and everything in between can be taken care of with the help of these technologies.
#7 Expense management
The new culture of remote working has presented new expense management issues before companies. Computer equipment, office supplies, and maintenance expenses that employees would need for working from home were covered by most companies. However, there persists the risk of employees taking the policy for granted.
Solution: Accounting and finance teams should update their expense policy, allowing home office expenses, gift cards, delivery services, and food. It would also be great to automate their expenses management process to keep track of costs and curb fraudulent ones.
#8 Cybersecurity
Data breaches, hacking, phishing, and all sorts of cybercrimes have cost companies whopping sums of money in the past. This challenge won’t go anywhere because unscrupulous individuals will always look for sensitive information. With most of the work being done online and from several locations, it’s truly a problem for companies to track suspicious activities on time.
Solution: To safeguard their processes and information from breaches and theft, companies should consider beefing up their cybersecurity measures. Accounting teams, in particular, should consider expanding their knowledge of internal controls, permissions, and information access. Any outdated software should be replaced with the latest solution to keep ransomware and malware attacks at bay.
#9 Getting errorless financial forecasts
The pandemic created conditions that made it difficult for accounting teams to get accurate financial forecasts to make decisions. Companies had to deal with a fluctuating financial ecosystem, and even now, they are striving to stay afloat despite the adversities.
Solution: To tackle the challenge of financial forecasts, businesses should consider engaging in scenario planning and re-examining different projections, for example, sales, cash flow, and expenses. It’s time to use data-based predictive analysis to understand various trends and factors in aspects that can impact the company’s financial position.
Conclusion
The above are some of the challenges that accounting teams are facing in 2021 following the changes brought about by the coronavirus pandemic. It’s a tough period for all businesses, and accounting teams should consider implementing these solutions to sail through it.
Unexpected circumstances are something companies should prepare for, and professional indemnity insurance or PI insurance can be the right way to go about it. You can check online for a professional indemnity insurance quote. Looking for cheap professional indemnity insurance? You can compare professional indemnity insurance providers and check out the key coverage areas of their policy. Visit this website for more information.
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