How Do You Make Informed Decisions When Receiving Financial Reports and Analysis 21 Days After the Month End?
As the owner of a small or medium-sized business (SME) that operates across borders, have you ever stressed about not being able to gauge your company’s financial performance? Have you ever made late or wrong decisions without knowing the company’s projected cash flow?
What Causes the Delay?
Accountants are traditionally separated from the business side of a company, so they do not receive the necessary information, such as new contracts signed, new purchases made, or amendments on sales orders, when the actual transaction occurs. Business managers might also choose to provide a pile of invoices and other relevant documents to the accountants just once a month—or twice if they are generous—which causes the accountants to start considerably behind on all the paperwork. The accountants then have to check all the supporting documents, reach out to business managers to receive missing ones, and prepare the entries. Finally, they can arrange the month-end closing and reporting.
??::Bench Accounting on Unsplash
The American Productivity and Quality Center (APQC) studied 2,300 organizations—25% of which needed more than 10 days to close the monthly books. Because accountants typically receive some the paperwork long after the end of the month, the final reports are nearly half a month delayed, preventing appropriate decisions from being made at the right time. Below is a table summarizing the median cycle time for performing the accounting activities:
How to Solve the Delay?
The delay of the collection of information can be avoided by making sure that when business activities happen or business transactions are made, the relevant data will be automatically recorded. If the supporting document is stored alongside the information, we can also ensure its accuracy.
?In the past, only large corporations could afford this kind of “system”, or as we call it ERP system (Enterprise Resource Planning), that allows business transactions to be recorded on a database and used as the Debit and Credit recording for the accounting books.
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?Nowadays, with electronic payments and digital transactions being so popular, it’s getting more affordable for SMEs to get access to such a convenient system. Imagine how impactful an automated data collection and financial information data storage would be, plus having a set of self-generated financial reports. Our lives being the owners of an SME would become so much more comfortable.
??::John Schnobrich on Unsplash
Cross-Border Business with a few entities in different jurisdictions? No Problem
We see that “on the self” software are usually only good for companies set up in a particular jurisdiction. Recently, we started to come across a few innovative players that are cracking the global SME market by offering a software that can be used anywhere in the world (including China). The multiple entities, multiple locations, and multiple currencies set up for businesses is getting more popular. These global SMEs are seeking a one-stop shop for their cross-border businesses.
If you would like to know more about how CanCan will help you shorten those 21 days to understand how your company is performing, helping you make more informed business decisions, please feel free to contact us.
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