One of the hardest things to do as a business owner is to keep up with the latest legal requirements and accounting standards. The penalties for non-compliance can be crippling for your business. Therefore, it is critical to ensure that you’re staying compliant and honest in your financial reporting practices.
Unfortunately, these legal requirements can sometimes be difficult for the average person to keep track of, especially when it comes to expense management. Therefore, it’s a good idea to have an experienced accounting team on your side. If your business is located in or near Cincinnati, Orcutt & Co. can help.
In this article, we’ll explain more about accounting compliance, specifically in relation to expense management.
What is Accounting Compliance?
Accounting compliance requires that small businesses have transparent procedures for handling financials, ensuring that their reporting is accurate and meets local and international standards. There are two accounting standards that are internationally recognized:
Benefits of Compliance
In order to avoid penalties, compliance with these accounting standards is not something you can ignore. There are two steps in the accounting compliance process:
- Recognizing the need to follow rules/regulations
- Putting processes in place to ensure compliance and mitigate risks
There are several other benefits of accounting compliance beyond simply avoiding penalties, including:
- Allowing irregularities to be identified early
- Creates a reliable system for financial tracking/reporting
- Significantly reduces the risk of penalties due to non-compliance
- Helps businesses avoid potential legal issues
While internationally recognized accounting principles standardize accounting practices, there are also local regulations that must be followed. These can be complicated, especially when it comes to expenses.
One of the biggest challenges faced by small businesses is keeping up with the current regulations. This is why it’s important to have an experienced accounting team in place to help. These changes typically take place on January 1.
How do Businesses Handle Expenses?
Most small businesses have manual methods in place to manage expenses. In most cases, this involves recording any expenses in a spreadsheet and manually entering the numbers into their bookkeeping system.
While it may seem effective at first glance, this approach isn’t scalable and it’s not the most accurate or quickest way of managing expenses, and can often result in delayed reimbursement.
How Should Expenses be Managed?
While financial and tax regulations vary, there are several common principles that any business can apply to its expense management procedures:
- Policy: make sure that employees have a clear, accessible policy to reduce uncertainty regarding what can/cannot be claimed
- Acceptability: make sure that employees understand acceptable versus unacceptable claims
- Relevancy: only require information necessary to process claims and make the process for submitting reports and receipts easy
- Accountability: establish a simple, streamlined process that can be handled from any connected device
- Punctuality: make reimbursement efficient, creating faster payments and a positive experience for your employees
Orcutt & Co. Can Keep Your Small Business Compliant
As a small business owner, you have a lot on your plate. Staying compliant with accounting regulations can be complicated. Don’t let that be what brings your business down. Let Orcutt & Co. help you manage your financials. We stay on top of changing regulations and will ensure that your business remains 100% in compliance at all times.