Employees Benefit From Proper Company Accounting: Here’s How
You might already know how great proper accounting is for your business: you can rest easy knowing your taxes are accurate, your payroll is running smoothly, your books are well-kept, and that your balance sheet is accurate. But when great accounting practices are in play, it’s not only your business that enjoys the benefits.
A business’s employees also greatly benefit from proper accounting.
As it turns out, much of your employees’ lives and financial well-being rely on the accounting practices of your business. For example, when your business is practicing proper accounting, leaders will always have access to the most accurate financial records possible, meaning they’re less likely to be caught off-guard in a way that could threaten the job security of employees.
However, job security is just the tip of the iceberg, and there are many ways employees are directly impacted by great business accounting. In order for proper accounting to really benefit employees, it’s crucial to see the trickle-down impacts and understand which practices could benefit your employees the most.
What Do We Consider “Proper Accounting”?
“Proper accounting” is a catch-all phrase for stable and robust business accounting, and there are many aspects to it. Your business can either choose to handle these things internally or with the help of an outsourced accounting provider.
Here are a few main components of excellent business accounting, that might be relevant for your organization:
- Bookkeeping: Bookkeeping is the way you monitor how money is flowing in and out of your business. If you choose to go with an outsourced accounting solution, you’ll get an expert eye on the way money is flowing in and out of your business. Bookkeeping services can also include components such as bank account reconciliations, credit card reconciliations, and employee expense management.
- Taxes: When you have a business, just about one of the only things which are certain are business taxes. Business taxes can get pretty complex: you need to know which tax savings and credits are relevant to your business, manage 1099 forms, handle sales tax, and ensure your taxes are in alignment with HR compliance.
- Financial Reporting: Your business leaders need financial data in order to make the most educated and logical decisions possible. With financial reporting, analysis, and forecasting, you can always know if your company’s cash flow is going to meet its needs. You’ll best understand the direction of your company and can use that information to minimize risks and take advantage of opportunities.
- Cash Management: If your business is like most others, you likely have numerous sources of cash inflows and outflows. All of these sources need to be handled properly, so your business can manage expenses, and take things to the next level. While cash management matters for all businesses, it’s particularly crucial for startups and other new businesses: data tells us that one of the top reasons startups fail is because they ran out of money.
8 ways employees benefit
It’s easy to see how proper accounting practices can benefit your business. When your finances are taken care of, leaders can make the best decisions possible, your business will always be in compliance, and it’ll be best poised to be profitable. But as we touched on earlier, employees are also reliant on your business’ accounting practices and can be greatly impacted by proper accounting.
Here are some of the top ways employees benefit from proper accounting practices.
1. Job Security
Employees care about many things, including what their compensation is like, what kind of work-life balance they have, and what time they get to head home at the end of the day. But one of the top things they also care about is job security. Almost half of workers in one survey who were looking for jobs said that they wanted their new job to have greater stability and security than the job they currently had. And as it turns out, one of the top reasons companies let go of employees is in order to cut costs.
If your business doesn’t have proper accounting practices, it’s much more likely that leaders won’t have a complete picture of the finances. When things like cash flow, financial analysis, and even taxes aren’t properly taken care of, it could threaten the job security of your employees.
2. Timely and Transparent Payroll
Payroll is incredibly crucial to your employees, which only makes sense: it’s likely the main reason they’re employed with you. Because of how critical it is, employees tend to have a very low threshold for payroll issues. Data reveals that 66% of Americans say they would “experience financial difficulty” if their payroll was delayed by seven days and that 63% of Americans live paycheck to paycheck.
What this all means is that payroll has to be processed properly, accurately, on time, and transparently. It can’t be a mystery why an employee is paid a certain amount, and employees shouldn’t have to deal with delayed or inaccurate payments.
3. Fair Compensation
Proper accounting isn’t just good for your business: it enables leaders to make smart financial decisions, positioning their company to be as profitable as possible. With those profits, even startups and small businesses can offer their employees fair, competitive compensation (which includes wages and non-wage compensation).
One study showed low pay was the biggest reason American workers quit a job in 2021, while another survey showed that 78% of employees are more likely to stay at an employer because of the benefits. When a business has proper accounting practices, it’s better able to compensate its employees and provide valuable non-wage benefits.
4. Efficient Reimbursements
If your company operates with employee reimbursements, then you know how crucial it is for this process to happen quickly and accurately. Reimbursements might be necessary for things like work-related purchases, travel, and other business-related expenses. Unfortunately, this process can quickly become complicated, particularly if a business doesn’t have excellent accounting practices. Receipts can get lost, books can get messy, and employees might experience delays with reimbursements, or inaccurate payments.
But when a business has top-notch accounting practices, reimbursements can be quick, easy, and accurate.
5. Trust and Credibility
Employees want to work at a reputable company that’s known for being a leader in its industry. If a startup or other fast-growing business is a mess financially, there’s a fair likelihood that this will become known to crucial stakeholders, such as investors, clients, and lenders. If the credibility of a company is anything but excellent, employees might bear the burden of this struggle. For example, if there’s a lack of credibility, employees might experience poor job security or negative impacts from the company’s reputation.
6. Useful Resource Allocation
The talented folks on your team need funds in order to do their jobs right. Whether marketing is looking for a little extra budget for their next big campaign, or IT is pounding down your door because a new piece of equipment is desperately needed, resources need to be allocated properly. When your budget is in order, cash flow is well understood, and your financial projections are something to be excited about, you can give your team the budgets they deserve. However, if your accounting is disorganized or inaccurate, you’re bound to come up short when it comes to the allocation of funds.
7. Accurate tax processes
When it comes to employees, a key responsibility of employers has to do with taxes. For full-time employees, there are processes and legal requirements around things like tax withholdings, and there are entirely different processes when it comes to contractors (such as 1099 employees). When your business finances are being taken care of properly, taxes will be a breeze. Withholdings will be accurate, taxes will be filed in a timely fashion, and all of your employees will be categorized appropriately.
8. Financial transparency
Financial transparency can often matter to employees. They might want to know about the financial health of the place they’re working, for example, and understand how it performs, how stable it is, and how likely it is to grow. When a business has proper accounting practices, it’s going to have things like accurate financial statements, which can help provide this transparency to employees
Proper accounting tangibly impacts employees
Sure, proper accounting is incredibly important for businesses. But it also has a powerful impact on employees. When accounting practices are rock solid, employees are more likely to have job security, accurate payroll, and taxes, and benefit from things like financial transparency and better resource allocation.
It might sound like proper accounting is a lot to get right, but it doesn’t have to be. Here at hiline, we specialize in financial and cloud accounting services for startups, influencers, streamers, and growing businesses, designed to benefit both you and your employees. Interested in learning more? Let’s talk.
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