Among the reasons organisations decide whether or not to purchase and implement accounting software is whether or not the software can reduce costs.
Finance Team Salary
There are obviously a number of factors at play when it comes to evaluating a business’s accounting costs, but the largest and most obvious is salary. Expenses for accounting salary can add up quickly. Here’s a rundown of the average salary for accountants across a number of levels, according to Salary.com.
Tax Accountant I: Typically responsible for maintaining and preparing tax returns, tax records, tax schedules and related tax reports. Median salary is $54,491.
Tax Accountant III: Median salary for this position is $81,725 for maintaining and preparing tax returns, local state and federal returns, and analysis of tax regulations.
Financial Reporting Accountant IV: Responsible for preparing and maintaining returns, as well as collecting and analysing changes in local, state and federal regulations to ensure work processes are in compliance. Financial reporting accountants in this role ensure that all reporting is in compliance with SEC and GAAP reporting guidelines. This role typically requires more than seven years of experience. Median salary is $97,355.
Cost Accountant III: Responsible for preparing and analysing cost reports and costing audits, a Cost Accountant III examines and reviews unusual cost records and ensures cost data are allocated correctly. Their median salary is $82,479 for a person with four to seven years of experience.
Of course, accounting software won’t remove the need for an accounting department entirely, but it has been proven to provide the following benefits: allow a company to avoid adding staff to the finance team despite double digit growth; switch one employee from finance into a revenue generating sales role; and cut close time from nine days down to two hours. Those are just a handful of examples, but given the salaries demanded today by top accounting professionals as listed above, the automation that accounting software provides starts to pay for itself pretty quickly either by eliminating the need for existing finance team positions or eliminating the need to add more as a company grows. For example, if accounting software eliminates the need for just one Tax Accountant II, in just three years a company will have saved on average $245,715. That in and of itself can go a long way towards paying for itself. However, while the elimination of salaried finance positions is the most obvious and one of the most effective ways of reducing costs for a business, it is by no means the only one.
Identifying Wasteful Spending
With automation freeing up time spent on manual data entry, reconciling different sets of numbers in multiple Excel spreadsheets and other tedious tasks, the finance department can spend more time on evaluating business performance. And because finance and the business side typically have more faith in the numbers once they’re entered into a central general ledger, they are more willing to make critical decisions on that data. For example, accounting software can help to identify which employees are producing the most value relative to their salary. Alternatively, accounting software can help to identify the most profitable customers and ensure that the business isn’t devoting the most time and resources to the customers that are the least profitable.
For many small and growing businesses, invoicing the customer can be an expensive proposition. Invoicing encompasses maintaining master customer and product files, generating customer billing data, transmitting billing data to customers, posting receivables entries and resolving billing enquiries. One survey of 896 organisations found that the worst performing organisations spend on average $9 to invoice a customer, the best performing spend $2 per invoice and the median is $3.94. Accounting software that is fully integrated with other departments can reduce this cost significantly as it can automatically generate and send invoices to customers and recognise payments. Business growth typically involves more invoicing, meaning greater costs for those still stuck with manual processes. Additionally, automated invoicing and billing with accounting software means fewer errors, which can improve relationships with valued customers.
Greater Business Visibility
With a centralised system of record that everyone in the organisation can agree to, the business is better positioned to hit margin goals and improve the bottom line.
Less Reliance on Excel
Early stage businesses that do not have modern accounting software installed, typically rely on Microsoft Excel spreadsheets to manage finances. While a useful tool, Excel spreadsheets can create hidden costs that many organisations fail to take into account.
For example, Excel requires manual review and preparation of reports. A Cost Accountant III, with a median salary of $82,479 as above that spends 30 hours a month on Excel reporting could account for nearly $15,000 a year on reporting. Modern, cloud-based accounting software can provide automated report creation, enabling a business to cut back on its accounting department or redirect those resources elsewhere to more profitable work. Moreover, the average report goes to eight different people, creating additional workloads and time drags. The benefits of automation add up quickly.
Data Entry Errors
The costs of incorrect data entry in an Excel spreadsheet can lead to millions of dollars in losses. In 2003, TransAlta cost the firm $24 million when the power generator purchased too much in transmission contracts. CEO Steve Snyder said in a conference call that the error was "literally a cut-and-paste error in an Excel spreadsheet that we did not detect when we did our final sorting and ranking bids prior to submission."
In other cases, Fanie Mae discovered a $1.1 billion error in shareholder equity due to a miscalculation and RedEnvelope lost a quarter of its value after it reported a fourth quarter loss because of overestimation of margins based on a spreadsheet error.
While data entry errors won’t reach into the millions for most businesses, the evidence is there that a reliance on spreadsheets can be costly.
A modern accounting software solution can quickly pay for itself in reducing costs as listed here, but it also can create the confidence in financials and impact the kind of decisions that drive business growth as well.
NetSuite’s cloud ERP platform provides comprehensive functionality across accounting, financials and reporting for businesses at every stage of growth, enabling them to reduce costs through better reporting, automation of manual tasks, reducing errors and saving on staffing costs. NetSuite accounting capabilities include:
- A dynamic General Ledger that allows customers to add custom GL impact lines to transactions.
- Custom segments to ensure accuracy and save time.
- Multi-Book Accounting that eliminates data replication and reduces the need for manual adjustments to accounting processes
- Accounts Receivable for automated, streamlined operations.
- Accounts Payable with simplified and automated exception processing for mismatched invoices, better controls and streamlined processes.
- Automated global tax compliance.
- Fixed Asset Management to control the complete lifecycle of depreciating and non-depreciating assets.
- Cash Management to provide a complete view of a company’s money flows and cash position.
- Payment management for centralised, streamlined payments that meet all customer preferences.
Double digit growth without adding finance staff
Repurpose one employee into a revenue generating sales role.
Cost of invoicing