Are traditional accounting methods a roadblock for D2C brands?

Posted on March 17th, 2021
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Are traditional accounting methods a roadblock for D2C brands?

Every element of the direct-to-consumer (D2C) business model stands for advanced levels of digitization and innovation. In such a NOW framework, older methods often fail to fit in, especially when it comes to traditional accounting systems. The traditional lot includes some well tried, tested, and established accounting procedures. Unfortunately, they don’t seem to keep up with today’s dynamic business environment.


So, are D2C brands suffering due to outdated accounting methods?

Most possibly, yes!

Here’s why and what we can do about it....


Traditional accounting and its limitations


Well established accounting practices of yore perform the job of tracking your business, provided your business follows traditional rules. If you’re an online D2C entity, you will soon find that your traditional accounting is unable to track progress accurately or offer a true picture of your business performance.


Another requirement for traditional accounting is a limited product or service range with no personalisation or custom designed offerings. So, if your D2C is largely brick and mortar, with a handful of products, you may still get away with traditional accounting practices.


Hence, D2C companies require accounting systems that are in tune with their unique business characteristics.


Adopting a Modern Accounting approach


For any D2C company, it is essential to generate accurate financial reports, especially when looking for investments, tie-ups or partnerships. Business decisions regarding adequate cash flow, expenditure and recruitment also need support from modern accounting methods, fueled by technology.


Adopting a modern accounting method does not necessarily mean immediate investment in super elite, cutting-edge technology. Appointing an experienced accounting team and a smooth payment processing system is a good place to start.


Digital accounting refers to an automated electronic system utilised for the formation and transmission of your financial information. It is maintained in real time and takes into account every aspect of a D2C business. This automated quality is what offers extra time to focus on core business activities by utilising the latest accounting software.


It boosts accuracy and optimizes productivity while handling the books and tracking.


Another advanced feature of digital accounting is its ability to utilise data analysis. It can collect, assess and procure data that can have a massive impact on your business.

Cloud-Based Accounting

Cloud-based accounting offers the multiple benefits of storing accounting information in a way that minimizes risk. Secure, off-site cloud storage has taken digital accounting to the next level.


The cloud also elevates modern accounting systems by giving access to financial information from multiple devices, in any location. Permissions and access processes protect this data while allowing it to be reviewed from anywhere.


As a D2C business owner, you have the privilege to view every business transaction, in real time, without contacting your accountant or waiting till Monday for the accounts office to reopen. You may even decide who you wish to collaborate with for your bookkeeping systems, or who gets partial or full access to your financial information, via the internet.


The unified accounting system


Given the challenging circumstances and financial responsibilities associated with running a successful D2C brand, a modern accounting system makes things much easier.


Business records, financial statements, invoice information and payment records are instantly accessible, at any time. You may also hire the services of outsourced accounting teams. This reduces costs by eliminating the need to hire full time professionals.


Hence, utilizing technology can improve your accounting systems and business processes with accurate financial tracking and proactive insights. One can even mix the old and new with computerized solutions using traditional transaction processes, along with modern data inputs for even better results.


Consolidated advantages of Modern Accounting Systems for D2C brands


Here are some more advantages of a modern accounting system that fulfill all your financial needs.


Better Value


A modern accounting system can accurately track while predicting your sales. It takes into consideration the current demand, delivery time and other aspects required to get the true picture of your business.


Accurate sales estimates or forecasts allow you to order, track and deliver efficiently. Also, you are in a better position to respond quickly to market demand, eliminate issues and produce what is needed to avoid wastage. This will enable you to scale your business, add to your portfolio or expand over time.


Lower Costs


You can monitor costs in more detail and keep an eye on expenses to be able to manage money in a more efficient way.


When your top level managers are given valuable data on current costs or historical records, they are empowered to create more factual budgets. This can result in better business planning and increased profits.


Minimal errors


In-built verification systems make modern accounting programs almost perfect. They can be programmed to only accept certain inputs in a prescribed format.


Unreasonable data is rejected and the result is reliable forecasts that ensure there are no costly mistakes committed, based on false reporting.


Always improving


Unlike traditional accounting systems, modern ones have the freedom to adapt and change. Information stored on large volumes of paper is difficult to manage and evaluate.


With digital means, old records can be compared to current trends and results can be predicted for varying business scenarios. Most importantly, these systems can be continually tweaked to suit needs and improve accuracy.


In this way, modern accounting systems are gaining prominence in the D2C sector owing to their ability to identify cost saving and offer more effective business solutions.


Category:
Best Practices

Posted on:
March 17th, 2021