While revenue is small, simple accounting processes or spreadsheet management are often enough. As the number of transactions and invoices grows, however, an accounting function that depends on manual work becomes prone to processing delays and errors.
- Revenue is growing, but the accounting function has remained small and cannot keep pace
- Monthly reporting to headquarters takes too long
- Accounting errors and delayed responses are increasing as transaction volume grows
- The accounting system and workflow have not kept pace with the scale of the business
This article explains the accounting management points foreign companies should review as their Japan entity's revenue grows.
Why Accounting Challenges Surface During Revenue Growth
While revenue is small, simple accounting processes or spreadsheet management are often enough. As the number of transactions and invoices grows, however, an accounting function that depends on manual work becomes prone to processing delays and errors.
Foreign companies in particular need to handle both Japanese accounting standards and headquarters' reporting format (such as IFRS or US GAAP), and the burden of this dual reporting increases sharply as revenue grows.
Accounting Management Items to Review
The following items deserve particular attention as revenue grows.
| Item | What to Review |
|---|---|
| Accounting system | Whether it can handle rising transaction volume, and whether too much still relies on manual work |
| Monthly closing process | Whether the process and schedule can meet headquarters' reporting deadlines |
| Receivables management | Whether there is a mechanism to manage the risk of uncollected revenue as sales grow |
| Expense and payment workflow | Whether the approval process moves at a speed that matches transaction volume |
| Internal controls | Whether checks are in place to prevent fraud and errors |
How to Strengthen the Accounting Function
Reviewing the accounting function is not something a new system alone can solve; it requires redesigning workflows and roles as well. In a small accounting team especially, work tends to concentrate on one person, so the risk of siloed knowledge also needs attention.
Where it is difficult to build out the accounting function internally, using outside accounting specialists or outsourcing can help the function keep pace with the speed of revenue growth.
Summary
- An accounting function that depends on manual work becomes prone to delays and errors as transaction volume grows
- Review the accounting system, monthly closing process, receivables management, expense and payment workflow, and internal controls
- Reviewing the accounting function should cover workflow and roles, not just the system
- Consider outside accounting specialists or outsourcing as an option
Contact
JBN provides one-stop support, from reviewing a Japan entity's accounting function through to hands-on support.
To discuss reviewing your accounting management, please contact us.