Accidental accounting blunders are common. Businesses can make mistakes given the multitude of standards and laws governing financial reporting and the drive for timeliness. Inaccurate reporting can cause legal difficulties, stock price drops, and disastrous company decisions.
There’s so much to preach about having good books and records. But to be strategic in thinking, it’s paramount to have a controller as the company gets bigger and bigger. Once you start hitting a $10 or $20 million level, depending on the type of business, the need for a tactical controller who would work with a strategic CFO is imperative.
A CFO is often either required or highly recommended when a business reaches a certain stage. A CFO can help with inventory management, develop profitable pricing strategies, and provide visibility into areas that affect margins. Strategically, they can aid in developing a useful capital and organizational structure as well as a potent strategy for business expansion.
Working hand in hand with the CFO is a controller who does well in overseeing all the accounting functions of the company. A controller plays a key role in the creation of all internal control policies and procedures in a company and contributes to its financial strategy. Thus, it’s important for the controller to be someone who understands where the “bodies are buried” and can tell the process from A to Z for the CFO to better understand the financial transactions of the company. It is expected of a tactical controller to assist in managing and developing strategies for risk reduction. They assist in ensuring that all financial systems are maintained, capable of identifying any potential areas for improvement, and fit for purpose.
The Significance of Keeping Accurate Records
A company’s accounts must be accurate and current at all times. All business income and expenses, including receipts, invoices, and purchase orders as well as payments made and received, should be fully and precisely documented to support the accounts. A good controller should be able to maintain meticulous records that would help with tax returns and in avoiding fraud and theft. Maintaining accurate records will enable you to track spending, debts, and creditors and request more money, apply for additional funding, avoid penalties by timely and accurately paying your taxes, and apply for and obtain the appropriate number of credits or benefits.
Addressing the Unique Accounting Challenges in the Software Industry
One of the most complicated industries in terms of accounting and financial statement reporting is the IT and software sector. The cost of IT systems and services has increased significantly on a global scale. Recognizing revenue and expenditure can be especially difficult in this industry. The sales process, the volume / complexity of the sales transactions, the number of inputs needed in the revenue process, or the proper accounting standards that apply to your business can all pose challenges.
Understanding products and services, technical terms, accounting terms, organizational structure, and revenue recognition policies is crucial for the accounting department. To conquer accounting challenges in the IT and software vertical and to improve financial statement presentation, it is crucial for both the controller and the CFO to have a better understanding of the industry, the terms of the customer agreement, and the cost components. Equally important is the proper documentation of both the company’s industry-specific expenditures and revenues.
The Sales Tax Economic Nexus Train Wreck
Sales tax collection can be challenging. You should be aware of the nexus tax regulations in each state if you own a business.
The new economic nexus laws have not been met with immediate response from many small and mid-sized businesses. When a company sells into multiple states, compliance can be difficult and costly because each state may have its own nexus requirements and sales tax laws. The sales tax nexus thresholds apply to annual activity, but monthly or quarterly sales tax filings are usually necessary. As a result, the seller may need to hire more staff, alter its accounting or resource planning systems, or work with an outside consultant or resource to stay on top of all sales tax compliance requirements.
Small and large businesses must undoubtedly determine which additional states they will need to file in, despite complexity and cost. They must file returns, remit taxes, and register with the state revenue offices in order to collect sales tax from their clients. Additionally, some states have started to apply the economic nexus standards to corporate income taxes, which might necessitate the filing and payment of income taxes by sellers who do business in those states.
Finding your company’s sales tax nexus areas is just the first step toward compliance. Your best ally in addressing economic nexus and sales tax compliance is Credo’s CFO and controller services. Use our services to their full potential as we pull on the thread and assess your obligations in light of your response to our probing. With your input, we will create a strategy to effectively handle your sales tax obligations while taking risk and materiality into account. Our strategy will consider a range of options, including prospective registrations and voluntary disclosure agreements. We help you increase your tax compliance while also saving you millions of dollars in reduced obligations.
Seek the Help of Credo’s Tactical Controller and Strategic CFO
Accurate and timely financial reporting is ideal. Inaccurate financial statements and other communications can result from unintentional errors and fraud. Poor operational decisions, reputational damage, bankruptcy, and legal action are among the company’s risks. When you own a business, it’s easy to view controllers as glorified mechanics who keep your financial machinery running smoothly. They serve as business watchdogs, too. They ensure that companies report their finances clearly and according to accepted standards, which puts them in ethically or legally questionable situations.
At Credo, we free our controllers from traditional duties like closing the books and enforcing accounting standards. We balance strategy and tradition well. CFO strategizes for the company’s future, advances the organization, and advises stakeholders on business decisions. But the tactics that the controller provides enable the CFO to fulfill the strategic goals of the company. Contact us to learn how we can help your company’s finances.
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