How Accounting Software Reduces Operational Costs

How Accounting Software Reduces Operational Costs

One of the key factors organizations consider when deciding whether to purchase and implement accounting software is its potential to reduce costs.

Finance Team Salary: Evaluating the Impact on Business Costs

When assessing a business’s accounting costs, one of the most significant factors is salary. Accounting salaries can quickly accumulate, making them a major consideration for any organization. Here’s an overview of the average salaries for various accounting roles, according to Salary.com:

  1. Tax Accountant I: Typically responsible for maintaining and preparing tax returns, tax records, tax schedules, and related reports. The median salary for this position is $54,491.
  2. Tax Accountant III: This role involves maintaining and preparing tax returns, including local, state, and federal returns, as well as analyzing tax regulations. The median salary for a Tax Accountant III is $81,725.
  3. Financial Reporting Accountant IV: These professionals prepare and maintain financial returns, analyze changes in regulations, and ensure compliance with SEC and GAAP reporting guidelines. This role, which typically requires over seven years of experience, has a median salary of $97,355.
  4. Cost Accountant III: Responsible for preparing and analyzing cost reports and conducting costing audits, a Cost Accountant III examines unusual cost records and ensures accurate data allocation. The median salary for someone with four to seven years of experience in this role is $82,479.

While accounting software won’t eliminate the need for an accounting department entirely, it offers several cost-saving benefits. For instance, it can prevent the need to expand the finance team despite significant company growth, allow a finance employee to transition into a revenue-generating sales role, and reduce the close time from nine days to two hours. These examples highlight how accounting software can quickly offset its costs by reducing the need for additional finance team positions or by eliminating existing ones.

For example, if accounting software removes the need for just one Tax Accountant II, a company can save approximately $245,715 over three years. This substantial saving can significantly contribute to the cost of the software. However, eliminating salaried finance positions is just one of the ways accounting software can reduce costs. Its automation capabilities and efficiency improvements offer numerous other cost-saving opportunities for businesses.

Streamlining Invoicing: A Cost-Effective Solution for Small and Growing Businesses

Invoicing can be a costly and time-consuming task for small and growing businesses. This process involves maintaining customer and product files, generating billing data, transmitting invoices to customers, posting receivables, and resolving billing inquiries. A survey of 896 organizations revealed that the worst-performing companies spend an average of $9 per invoice, the best-performing spend $2, and the median cost is $3.94 per invoice.

Accounting software that integrates seamlessly with other departments can dramatically reduce these costs. By automatically generating and sending invoices and recognizing payments, such software minimizes the need for manual intervention. As businesses grow, the volume of invoicing increases, leading to higher costs for those reliant on manual processes. Automated invoicing through accounting software not only reduces costs but also minimizes errors, enhancing relationships with valued customers and supporting sustainable business growth.

Enhanced Business Visibility

A centralized system of record that is accessible to everyone within the organization provides greater business visibility. This unified approach ensures that all departments are aligned, allowing the business to more effectively achieve margin goals and enhance the bottom line.

Reduced Dependence on Excel

Early-stage businesses without modern accounting software often rely on Microsoft Excel spreadsheets to manage their finances. While Excel is a useful tool, it can introduce hidden costs that many organizations overlook.

The Burden of Manual Reporting

Using Excel for financial reporting necessitates manual review and preparation of reports. For instance, a Cost Accountant III, with a median salary of $82,479, who spends 30 hours a month on Excel reporting, could be dedicating nearly $15,000 annually solely to reporting tasks. Modern, cloud-based accounting software offers automated report generation, allowing businesses to either reduce their accounting staff or reallocate those resources to more profitable activities. Additionally, the average report is distributed to eight different people, compounding workloads and time delays. The advantages of automation accumulate swiftly, leading to significant efficiency gains and cost savings.

The High Costs of Data Entry Errors

Data entry errors in Excel spreadsheets can lead to significant financial losses. For instance, in 2003, TransAlta incurred a $24 million loss due to a cut-and-paste error in an Excel spreadsheet, leading the power generator to purchase excess transmission contracts. CEO Steve Snyder acknowledged that the mistake was not detected during the final sorting and ranking of bids prior to submission.

In another instance, Fannie Mae discovered a $1.1 billion error in shareholder equity due to a spreadsheet miscalculation. Similarly, RedEnvelope lost a quarter of its value after reporting a fourth-quarter loss caused by overestimated margins based on a spreadsheet error.

While not all businesses will experience errors of this magnitude, these examples illustrate the potential high costs of relying on spreadsheets for financial management.

Modern accounting software can mitigate these risks and quickly pay for itself by reducing costs, enhancing confidence in financial data, and supporting informed decision-making that drives business growth. NetSuite’s cloud ERP platform, for example, offers comprehensive functionality across accounting, financials, and reporting for businesses at every growth stage. This helps reduce costs through improved reporting, automation of manual tasks, and error reduction, while also saving on staffing costs.

NetSuite’s accounting capabilities include:

  • Dynamic General Ledger: Allows for custom GL impact lines to transactions, ensuring detailed financial tracking.
  • Custom Segments: Ensures accuracy and saves time by allowing specific categorization of financial data.
  • Multi-Book Accounting: Eliminates data replication and reduces the need for manual adjustments in accounting processes.
  • Accounts Receivable: Automates and streamlines operations to improve cash flow management.
  • Accounts Payable: Simplifies and automates exception processing for mismatched invoices, enhancing controls and streamlining processes.
  • Automated Global Tax Compliance: Ensures adherence to tax regulations across multiple jurisdictions.
  • Fixed Asset Management: Controls the entire lifecycle of depreciating and non-depreciating assets.
  • Cash Management: Provides a complete view of a company’s cash flows and financial position.
  • Payment Management: Centralizes and streamlines payment processes to meet all customer preferences.

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Summary
How Accounting Software Reduces Operational Costs
Article Name
How Accounting Software Reduces Operational Costs
Description
Discover how accounting software reduces costs, minimizes errors, and boosts business efficiency with automation and comprehensive financial management.
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ABJ Cloud Solutions
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