“Accounting is the language of business.” – Warren Buffett
Introduction
Exciting trends are expected in 2024, but it’s not all plain sailing. The biggest challenges in 2024 include cash flow, tax and regulatory changes, and cybersecurity.
More below.
Financial Reporting: Compliance Changes & New Accounting Standards
Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) have introduced new compliance regulations.
Financial disclosures might be the most challenging, especially regarding environmental, social, and governance (ESG) and cybersecurity.
Focus on reporting, including leases, insurance contracts, tax assets, materiality, and even estimates.
Penalties for non-compliance:
- Near crippling fines for companies
- Imprisonment for non-complying individuals
- Tarnished business reputation
- Non-complying individuals’ reputations are also tarnished.
As you see, the penalties for non-compliance aren’t worth the risk.
Cash Flow Management
Economies go up and economies go down. The trick is to optimize one and weather the other. Cash flow management is a reliable strategy to survive a downturn.
Don’t be misled by a positive-looking income statement. Look at cash flow instead. It’s essential to manage your cash flow to avoid traps, like borrowing money at a higher rate than usual.
According to the SEC, some financial professionals underestimate the importance of cash flow, believing other financial statements to be more important.
This attitude is bad news when it comes to complying with cash flow regulations that are subject to change.
Accounts Receivable And Accounts Payable Processes
Here’s cash flow again. You must manage factors that impact operating cash flow, like past-due invoices and expense metrics.
Tracking daily cash flow reports reveals how changes and patterns give you a good picture of your business’s financial situation so you can plan for the future.
It helps to create a “cash flow” culture in your company so that it stays top of mind.
Expense Management
Effective expense management requires vigilant expense analysis to determine the impact large costs have on your business’s cash flow – and budget.
Keep a close eye on smaller expenses that don’t seem significant at the time, but that add up quickly. For example, you can reduce travel expenses by having more online meetings.
Consider tighter control measures, like automated software that makes spending more transparent so you can see if employees are sticking to new lower limits.
Payroll Management
Small businesses may have no choice but to manage payroll-related tasks. Miscalculations could creep in and create an assortment of frustrating and expensive accounting problems.
Third-party firms can be too expensive, especially for mom-and-pop businesses that have very few employees, leaving them to fend for themselves in payroll management.
The risk is turning to less experienced people recommended by a friend of a friend. Mistakes, especially if they are numerous and/or large, attract the attention of auditors and then you’re in a heap of trouble.
Another major challenge is staying on top of changes in financial regulations. Non-compliance could result in severe penalties.
Accounting Automation and Artificial Intelligence
Artificial Intelligence (AI) technology is becoming more prevalent in accounting, managing tasks that include budgeting, forecasting, analytics, and visualization.
As convenient as this is, it means that accountants have to develop new skills as they adapt to the changing financial landscape.
Their role could evolve into something more strategic or advisory as they interpret the information generated by AI or software automation.
Accurate Financial Forecasts
Big data is big news, but most businesses don’t capitalize on it. Business leaders can use the data for financial analysis, scenario planning, and more accurate forecasts.
They should delve into sales, expenses, and cash flow. Accountants recommend using financial statements as a base to evaluate and predict business performance.
Read our article on Scenario Planning and Future Proofing for Nonprofits.
Hiring and Retaining Top Accounting Talent
The finance industry is experiencing a skills shortage that the American Institute of Certified Public Accountants (AICPA) and the Chartered Institute of Management Accountants (CIMA) have identified as the biggest challenge facing CEOs, CFOs, and controllers.
Other factors affecting the low rate of employment include stricter education criteria, emphasis on work/life balance, and the high rate of retirement among experienced accountants.
Firms must provide extra value to retain employees, like increasing salaries and ongoing education and training.
Tax Law Changes
Tax laws are regularly updated, keeping accountants on their toes. It’s crucial because some updates put money back in your account.
Keep an eye on the Inflation Reduction Act for changes, like its alternative minimum tax for corporations and renewable energy credits.
Watch out for pending bills that extend provisions in the Tax Cut and Jobs Act, which are particularly beneficial for small businesses.
Download the Inflation Reduction Act Guidebook.
Track government and state bills
Cybersecurity
Cybersecurity is essential for industries that rely on sensitive information. Accounting is virtually based on sensitive information, like customer data, employee records, and intellectual property.
Data breaches aren’t only catastrophic for clients. Abnormalsecurity.com stated It takes 204 days, on average, to identify and contain a data breach, and the average cost is $4.45 million – a 15.3% increase over $3.86 million in 2020.
The Securities and Exchange Commission (SEC) intends to halt breaches by updating reporting rules for cyber incidents; for example, material cyber incidents must be reported within four days of detection, using form SEC Form 8-K.
Businesses must note that their SEC Form 10-K contains additional changes to cybersecurity risk management, strategy, and governance.
Read the abnormalsecurity.com article
Read the SEC press release on Forms 8-K and 10-K
Read the SEC Statement on Cybersecurity Disclosure by Erik Gerding
Director, Division of Corporation Finance
Solution
You can avoid or mitigate many of these problems by adopting real-time SaaS automation software and ERP systems with modern technology, like Sage Intacct.
Accounting firms can use this technology to increase their adaptability to new challenges, including supply chain interruptions and fluctuating revenue that are affecting accounting.
Read about the Lescault and Walderman accounting team.
Learn more about Sage Intacct services from Lescault and Walderman.
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