The primary goal of accounting is to provide an accurate representation of a company’s performance represented by its financial statements. Many businesses, during their infancy, while understanding the need for accounting, seldom manage to do it on time. While there are no rules set in stone, significant time delays are statistically linked with lower quality statements which usually contain wrongful entries or missed transactions. Multiple heuristics can determine the delay margins a business can accommodate without impacting the accounting accuracy.
- size of the company & regulatory and stakeholder requirement
- the orderliness of its documentation process
- use of electronic payment systems, etc.
Better heuristic parameters indicate better tolerance to longer delays. As guidance, for small businesses, we recommend
- Quarterly accounting if the transaction volume is low (less than 100 per month)
- Monthly accounting if monthly transactions volume is less than 300 per month
- Bi-monthly accounting if the transaction volume is high (greater than 300 per month)
Few benefits of a well-defined accounting process for a business are
- Evaluation and comparability of financial performance at any point in time.
- Accurate financial data aids to ensure precision in calculating operational and financial metrics for budget & forecast
- Timely and accurate reports for stakeholders
- Easy & timely statutory compliance