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December 16, 2022

Bookkeeping for Medium-Sized Business: Everything You Need to Know

Reading Time 6 mins

Bookkeeping for medium-sized business plays a significant role in keeping a company afloat and running smoothly, especially in the growth stage. When the firm is new, the owner often takes on the part of financial administrator. As the company moves into the medium-sized business segment and the volume of accounting work increases, it is better to transfer the management of financial matters to professionals because the cost of a financial mistake can be high.

Bookkeeping helps growing companies obtain funding, manage cash flow, comply with tax regulations, and organize business operations competently. Let’s talk about the peculiarities of performing financial transactions in medium-sized companies.

The definition of mid-sized companies

International economic organizations tend to classify medium-sized companies as a separate category; they also have the abbreviation «SMEs» to define small and mid-sized firms. In the US, the federal government only recognizes small and large firms, but other types of companies still exist in the country.

Despite a lack of clear specification, an organization is classified as a medium-sized business if its revenue ranges from $10 million to $1 billion and its staff is between 50 and 250 employees.

Main tasks of accounting in medium-sized firms

Starting a business may seem like a simple task. Still, as the company grows, many moving pieces can be challenging. Daily accounting can be the deciding factor when measuring and understanding your firm. Accurate bookkeeping for medium-sized business successfully copes with many tasks:

  • Getting assistance: do you need additional capital, but your financial statements are months behind? Regular bookkeeping for business avoids the pain of having to do several months of cleanup at once and the occurrence of errors.
  • Cash flow management: regular monitoring of bank transactions allows you to control cash flow and calculate profitability ratios.
  • Performance evaluation: as you dig deeper into your books, you may notice that a particular group of products or services is making a lot of money. After analyzing financial indicators, you may select individual areas for investment to optimize your company.

By keeping accurate records and books, you can feel confident and get an actual visual representation of how your company is developing. Fundamental accounting is key to comprehending the medium-sized business and making proactive decisions to get back on track as changes occur.

Bookkeeping for medium-sized business: everything you need to know

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Why should a midsize organization hire an accountant?

As your company grows, its financial structure will become more complex, and the risk that economic operations will go beyond the capabilities of its founders is greatly increased.

Without the help of experts, accounting tasks will take a long time, and you will face a significant risk of mistakes.

Bookkeeping for medium-sized business is a large amount of work, which includes proper record keeping, careful analysis, advanced financial planning, and constant study of tax law innovations. Tax rules are constantly changing, but a qualified accountant has all the necessary knowledge and resources to keep up with these innovations.

Hiring an accountant is one of the best options to improve your financial situation. The services and expertise that professionals offer often make their role advisory as well as strategic and practical.

Accountants vs. accounting software: pros and cons for mid-sized business

There is a large selection of different bookkeeping software on the market today that is cheaper than hiring a professional accountant. Many companies think about investing in the automation of financial transactions.

It isn’t easy to give a clear answer, which is more suitable in any situation: accounting services or special software. It can be judged on a case-by-case basis, as each medium-sized firm has its own needs. We can talk about the main pros and cons of each option.

Benefit features of an accountant:

  • Security: when hiring a reliable bookkeeper, you can be sure that all financial documents are correctly processed.
  • Save time: outsourcing account management to professionals will give you more time to focus on other vital issues.
  • Advisory role: an accountant can advise on various financial issues, which cannot be said about software.

The main disadvantage of hiring a qualified bookkeeper is the cost of services, which can vary depending on location, qualifications, workload, etc.

Pros of accounting software to use in medium business:

  • Affordable and cost-effective: although the cost varies depending on the platform type, it is a profitable option for financial management.
  • Tailored to your business: whatever your company needs, there is a system to suit them.
  • Easy data processing: information can be easily accessed, stored, and navigated on any platform, and account management becomes as efficient as possible.

If we discuss disadvantages, using computerized accounting, where all information is stored in the cloud, can leave a company vulnerable to potential fraud.

In most cases, the optimal solution for medium-sized firms is a combination of two options: hiring an accountant and using a digital bookkeeping platform (Quickbooks or others). Most online programs are cloud-based and designed to provide this kind of collaboration: company owners allow access to accountants, and data can easily be synchronized in a matter of seconds.

How to choose the best accounting software for a medium-sized business?

Depending on what you try to find, you may be overwhelmed by the market for excellent and inexpensive accounting software. Some platforms focus on readability and billing efficiency, while others can analyze receivables and generate free reports. On the other hand, the most advanced systems can handle tax issues on behalf of the business owner.

In any case, choosing the best accounting software for a medium-sized company takes time and effort. You must assess the situation adequately to clearly define what you want to find in a bookkeeping platform. To this end, you need to think about the following:

  • What specific functionality do you need?
  • What is your monthly or yearly income?
  • Who will use the platform, and how many accounts do you have?
  • Do you plan to sync other business platforms with this software, such as payroll, HR, or inventory solutions?
  • Are you interested in a local or cloud product?

Financing platforms for small companies often impose limits on things like inventory, customers, suppliers, and concurrent users. Accounting software for medium-sized business is designed to provide large amounts of data storage and the simultaneous work of several specialists.

Bookkeeping for medium-sized business: everything you need to know

Main challenges of medium-sized companies

While small businesses and large companies have their challenges, mid-sized organizations often face a unique combination of little firms’ problems, including limited resources and low margins, and big corporations, with their interstate taxation and significant investment planning. Medium-sized companies also have their challenges, including:

  • funding and debt
  • compliance with industry and state standards,
  • high costs to pay salaries, as well as to attract and retain talented employees,
  • difficulties with taxation
  • systems and processes,
  • growth planning.

The more a business expands, the more complex it becomes. It is an exciting process, but without proper planning, it may quickly get out of hand. Growth too fast is a common problem if we speak about midsize companies. They need integrated and optimized systems and processes to maintain control and grow steadily.

Outsourcing of financial services for medium-sized businesses

A professional accountant does not have to be a full-time employee. Outsourcing can successfully solve many of the problems faced by medium-sized organizations. When it comes to the services of a third-party accounting company, midsize organizations need to be picky. The only way to gain attention and get the services is to find a firm with a deep understanding of bookkeeping for medium-sized business. Outsourcing firms offer various benefits when they deal with such companies:

  • A complete solution is end-to-end processes: experts will implement, maintain and regularly improve your processes and accounting to achieve maximum efficiency.
  • CFO services: a senior accountant will handle financial data, strategic modeling, risk management, budgeting, and financial projections.
  • Customer service expert: a qualified assistant will answer all your questions and provide ongoing support.
  • Business intelligence tracking and analysis: professionals may integrate and transform your data and periodically provide you with comprehensive financial reports to help you make better business decisions.

Outsourcing companies have a strategy that helps midsize firms excel at their best by providing services and solutions to clients. It is inefficient for company owners to concentrate all their attention on accounting during company development; we recommend delegating these responsibilities to professionals.

Final words

Many medium-sized company owners may find it tempting to manage their finances and payments independently, but economic matters can be delicate and require a professional to handle them.

Qualified accountants help businesspeople make rational money decisions without violating regulatory requirements. Along with hiring financial staff, digital accounting solutions are increasingly being used. Special software for medium-sized business synchronizes bookkeeping with banks and helps to control the situation with cash in real-time.

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Author: Charles Lutwidge

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