Accounting Compliance: Definition & Advice From Expertson 9 February 2022
Accounting compliance means ensuring a business’s financial reporting is accurate and in line with current laws and regulations. To ensure this accuracy, it’s important to have clear processes and procedures for recording and verifying financial transactions.
That’s where experienced accountants and accounting firms come in—they use their knowledge and expertise to ensure companies remain in compliance.
There are two important components of this service: maintaining accounting best practices, and understanding clients' approach to accounting.
Maintaining Accounting Best Practices
Financial reporting is a key component of compliance. Ryan Maxwell, CFO of FirstRate Data, says that having strong, robust compliance practices makes reliable and timely reporting possible. “For example, if compliance on revenue cutoff is poor—e.g., there is no clear process for excluding post cutoff-date sales—then revenue numbers will erroneously include the next period's sales.”
Stephen Curry, CEO of CocoSign, adds that being diligent about compliance and reporting can help avert any financial misconduct. “Compliance and reporting are paired to accurately explain how much money an organization has and where it’s coming from. Once a company produces a set of compliance reports, it must make this information available to certain parties, which may include auditors and the public.”
Maxwell says one of the key compliance tasks is reconciliation, which is first performed by an internal compliance team and then checked and signed off by management. “Reconciliations offer a broad comfort that the reporting numbers are complete and accurate. For example, the bank reconciliation checks if the cash balance per the bank statement matches the internal accounting system's balance and thus gives comfort that all transactions have been recorded.”
Providing transactional documentation is another best practice for compliance. Curry says every transaction should be recorded in the organization’s general ledger for transparency and traceability purposes. “This is used to identify who initiated a transaction and why.”
Understanding Your Clients’ Accounting Systems & Business Context
Beyond compliance, it’s also your responsibility to advise your clients on their accounting approach and other financial matters. This requires having an in-depth grasp of how they operate and record transactions throughout the company.
“Firstly, you should document and understand the client’s internal accounting system (since these vary widely between companies),” Maxwell explains. “Then test the documented procedures by following several transactions through the accounting system and verifying that the procedure is fully adhered to.”
Curry recommends preparing and managing statutory or annual accounts while also offering financial advice to clients. “You can keep them updated with emerging compliance regulations and provide specialist tax advice and budgeting information.”
Jake Smith, managing director of Absolute Reg, recommends conducting a thorough review of your accounting processes and evaluating whether they’re in line with the client’s standards. “It’s essential to match your accounting practices with your clients’ needs to properly comply with business parameters and help maintain long-lasting client relationships.”
“Moreover, accounting firms also have to be more open in providing feedback and suggestions on what works best for the client’s business, especially if it involves accounting procedures,” Smith explains.
As an example, Smith says that you may provide alternatives on how your clients can legally avoid paying too much in taxes each year. You can suggest better accounting treatments on specific line items in your clients’ financial reports, such as instantly writing off assets or strategically deferring income and maximizing expenses. “These steps can provide clients with a better understanding of how to optimize their net earnings without violating any tax laws.”
Support Accounting Compliance With Better Client Communication
Traditional accounting software doesn’t fully address client collaboration, the cornerstone of solid customer relationships. That’s why one of the most pertinent cloud tools your accounting firm can take advantage of is Glasscubes—it’s a file storage solution and client portal in one.
Accountants are increasingly using our platform to improve their client experience because it allows them to:
- Control the flow of information between themselves and their clients
- Gather information from clients in a timely manner and automatically chase overdue or missing items
- Ensure information is acted on as it is received by replacing repetitive actions with a custom, automated workflow
Glasscubes is also security-minded: All data is protected by SSL encryption, and distributed across multiple physical locations across the UK to ensure high availability.
If you’d like a demonstration or want to see how other accountancies are using Glasscubes, learn more here.