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Accounting complexity can be a key sign that it is time to outsource your accounting. This complexity can come in various forms, but common complexities include: accrual accounting, inventory management, Cost of Goods Sold tracking, and\or sales tax just to name a few.

Accrual Accounting

Mature businesses use accrual-based accounting to track expenses and income for the period they occur. This can be a hairy process, but the result is accurate insights of when financial activity occurs versus the spikes that come with pure cash-based accounting. This can be particularly valuable for business who purchase or sell subscription services or that receive or make payments that cover month than one month. In reality, that is any business.

Inventory Accounting

Inventory can be a nightmare and failure to account for it properly gives the wrong perspective. A common mistake is to treat inventory simply as an expense rather than an asset purchase that gets marked up when sold later. By marking it as an expense, it can easily get lost on the balance sheet and potentially lost in the real world. By properly accounting and tracking inventory, it makes it easier to know when to reorder, identifying shrinkage (AKA theft), and being able to fulfill or ship a sold product on time.

Cost of Goods Sold Tracking

Cost of Goods Sold (COGS) tracking has great accounting complexity. Often poor inventory accounting bleeds over to poor COGS tracking. In this case a sale can be entirely recognized as profit on the books which can skew taxes owed. This is a basic error with COGS. More complex challenges include the inability to determine which products are profitable. Product profitability is immensely helpful, but hard to calculate without thorough accounting.

Sales Tax

Sales tax can be a huge pain – especially when selling online. Determining nexus, providing payments at the right time, and proper rates are not for the unexperienced.

Outsource It

This list is just a teaser of some complexities. Other accounting complexity comes with job costing, accurate payment fee accounting, amortization, asset depreciation and that’s just the beginning. If any of these activities apply, it’s time to consider outsourcing your accounting.

Stephen Brown

Stephen is the COO and co-founder of LedgerGurus. His job is keeping all the balls in the air. He has a degree in engineering, worked two decades in enterprise security software, and earned an MBA with an emphasis in finance and entrepreneurism before jumping into the world of outsourced accounting.