Business

The Services Offered by Modern Virtual Accounting Firms

Accounting Service Firms

Virtual accounting firms are companies that provide accounting services to clients remotely, without the need for in-person interactions.

These firms use technology such as cloud-based software and communication tools to connect with clients, manage their financial records, and perform tasks such as bookkeeping, tax preparation, and financial analysis.

The virtual model has many advantages for both clients and firms. For clients, virtual accounting services are often more convenient and cost-effective than traditional accounting services, as they eliminate the need for face-to-face meetings and reduce overhead costs for the firm.

For firms, virtual accounting allows them to expand their client base, as they can serve clients from anywhere in the world and increase operational efficiency by reducing the need for a physical office.

However, virtual accounting also presents some challenges, such as the need for strong data security measures to protect sensitive financial information and the potential for communication difficulties due to the remote nature of the relationship.

Virtual accounting firms must ensure that they have the right technology and processes in place to provide the same level of quality and professionalism as traditional accounting firms.

This article is a quick guide to some of the most important services offered by modern virtual accounting services. 

Accounts Payable

Virtual accounting firms – pioneered by the likes of Mike Savage from New Canaan – can help companies calculate accounts payable, which is the amount of money a company owes to its suppliers and creditors for goods and services that have been received but not yet paid for.

Virtual accounting firms use specialized software to manage accounts payable information, including invoices and payment records. This software allows virtual accounting firms to efficiently and accurately process large amounts of data and to automate many of the tasks involved in accounts payable management.

Virtual accounting firms can also provide a variety of other services to help companies manage their accounts payable, including reviewing invoices and reconciling vendor statements, ensuring that payments are made on time and within agreed terms, and providing reports to help companies track their cash flow and manage their financial performance.

It is vitally important that companies accurately work out their accounts payable figures. If they do not, they can be at risk of breaking the law, underpaying businesses they owe money to, and finding themselves in a huge amount of revenue due to legal actions taken against them. 

By outsourcing accounts payable management to virtual accounting firms, companies can improve their cash flow and reduce the risk of late payments and penalties. 

Accounts Receivable 

Accounts receivable data represents the amount of money that a company is owed by its customers for sales that have been made on credit.

Accounts receivable is a critical component of a company’s financial performance, as it represents the money that the company will eventually receive and can use to fund its operations. To manage accounts receivable effectively, companies need to have processes in place to monitor customer payments and ensure that payments are made in a timely manner.

Virtual accounting firms can help companies manage their accounts receivable by providing support in areas such as invoicing, payment tracking, and collections. Virtual accounting firms can also provide detailed reporting on accounts receivable, including reports that show which customers have outstanding balances and how long payments have been outstanding.

If a company fails to manage accounts receivable correctly, money that it is owed can fall through the cracks – putting a dent in the overall growth that the company can achieve. Virtual accounting firms provide an extremely cost-efficient way for businesses to make sure that their accounts receivable data is accurate and up to date. 

Payroll Processing

Payroll processing refers to the administrative tasks involved in paying employees for their work. This process involves calculating the correct amount of pay for each employee, taking into account factors such as hours worked, overtime, taxes, and deductions for benefits. Payroll processing also involves preparing and distributing paychecks or direct deposits, as well as preparing and filing the required tax forms.

Virtual accounting firms typically complete payroll processing by using specialized software that automates many of the tasks involved in the process. This software allows virtual accounting firms to efficiently manage large amounts of employee data and payroll information, calculate pay and taxes, and generate paychecks or direct deposit statements.

Virtual accounting firms can also provide payroll services to companies that do not have in-house payroll departments. In this case, virtual accounting firms receive payroll information from the company and perform the necessary calculations, preparing and distributing paychecks or direct deposits and filing the required tax forms.

Payroll processing is an important function for companies of all sizes, as it ensures that employees are paid correctly and on time. Virtual accounting firms provide a cost-effective and efficient solution for companies that need to manage payroll processing, freeing up valuable time and resources for other critical business tasks.

Expense Classification

Expense classification in accounting refers to the process of categorizing and grouping expenses incurred by a company in order to better understand and manage its financial performance. This is a critical part of financial accounting as it allows for a systematic and organized analysis of a company’s expenses.

Expenses are typically classified into several categories, including:

  • Cost of goods sold (COGS) – This category includes all expenses directly associated with the production of goods and services, such as raw materials, labor, and manufacturing overhead.
  • Operating expenses – These are expenses that are incurred as part of running a business, such as rent, utilities, salaries, and advertising.
  • Depreciation and amortization – This category includes the expense of long-term assets, such as buildings and equipment, over their useful life.
  • Interest expense – This category includes the cost of borrowing money, such as interest on loans and bonds.
  • Taxes – This category includes all taxes owed by the company, such as income tax and sales tax.
  • Non-operating expenses – These are expenses that are not directly related to the company’s main operations, such as gains or losses from investments. Accurate and consistent expense classification is important for several reasons. It helps the company better understand its expenses and identify areas where it can improve its financial performance. It also provides useful information for external stakeholders, such as investors and creditors, to assess the company’s financial position. Additionally, accurate expense classification is critical for preparing accurate financial statements, such as the income statement and balance sheet, and for tax reporting purposes.

Balance Sheet Generation

Some virtual accountancy firms are capable of helping companies to generate accurate and useful balance sheets. A balance sheet is a financial statement that provides a snapshot of a company’s financial position at a specific point in time.

It lists the company’s assets, liabilities, and equity, showing the resources it has at its disposal and the obligations it owes to others. The balance sheet is used to assess a company’s financial health and its ability to pay debts and meet its financial obligations.

The generation of a balance sheet in accounting starts with the identification and classification of the company’s assets, liabilities, and equity. Assets are resources that a company owns and can use to produce income, such as cash, accounts receivable, and property, plant, and equipment.

Liabilities are obligations that a company owes to others, such as loans, accounts payable, and wages payable. Equity represents the residual interest in the assets of a company after deducting liabilities.

The balance sheet is then prepared by listing assets in order of their liquidity, with the most liquid assets listed first. Liabilities are listed in order of their maturity, with the shortest-term liabilities listed first. The balance sheet must balance, meaning that the total assets must equal the sum of liabilities and equity.

A well-prepared balance sheet provides a clear picture of a company’s financial position, helping investors and creditors make informed decisions about their dealings with the company. It is also a useful tool for management to assess the company’s strengths and weaknesses and make decisions about future investments and expenditures.

Audit Support 

Virtual accountancy firms are often able to provide companies with audit support by performing an independent examination of a company’s financial records and operations to assess their accuracy and compliance with relevant regulations.

The purpose of an audit is to provide assurance to stakeholders, such as investors and creditors, that a company’s financial statements are a true and fair representation of its financial position and performance. An audit also helps identify any potential fraud or mismanagement.

Virtual accountancy firms typically have a team of experienced auditors who use a systematic approach to assess a company’s financial records, internal controls, and processes to ensure that the financial statements are free from material misstatements.

While many of the services offered by virtual accountancy firms are essentially automated, audit support has to be conducted by human beings.

In the future, advanced AI may play a part in audit support automation. Virtual accounting firms may also provide recommendations to improve financial reporting and internal controls.

These structural recommendations represent the ideal outcome of a financial audit: improvement.

Shares:

Related Posts