The accounting process is a series of steps that converts day-to-day business transactions into useful financial information. It ensures that financial data is recorded accurately, organized systematically, and presented clearly, following the applicable laws.
For many D2C companies and consumer brands, accounting still exists as a “back-office obligation”. It is revisited only during tax season or audits. The problems of such an approach? Studies show that about 44% of small businesses felt unprepared for tax season due to inadequate accounting systems.
Furthermore, a weak accounting process can lead to:
- Inaccurate financial reports
- Cash flow problems
- Compliance risks
- Costly penalties
Don’t want that? Read this article to learn about a “self-assessment diagnostic test” you can take to test the strength of your accounting process + identify improvement areas. But firstly, let’s learn what an accounting process really means and its various steps.
What is an Accounting Process?
The accounting process is a systematic method used by a business to identify, record, classify, summarize, and report financial transactions. The main purpose? It is to ensure that your business finances are accurate + compliant. Not just for taxes, but your books of accounts must support daily management and growth planning.
For a VP or director of a D2C company, a strong accounting process helps you:
- Know whether you’re actually making a profit
- Track cash flow and expenses
- Stay compliant with tax and regulatory requirements
- Make informed pricing, hiring, and expansion decisions
Primary Steps in the Accounting Process
The accounting process followed by organizations varies and depends on the nature of the business. The following factors influence how detailed or automated the process needs to be:
- Business size
- Industry type
- Transaction volume
- Regulatory requirements
- Use of technology
Yet, below are some steps that are usually found in the accounting processes of most entities:
Step I: Identifying Financial Transactions
Every business activity with a financial impact is identified, such as:
- Sales
- Purchases
- Expenses
- Loan payments
- Salaries
- Asset purchases, etc.
Note that only measurable monetary transactions are recorded.
Step II: Recording Transactions (Journal Entries)
Each transaction is recorded chronologically in the books of accounts using the double-entry system (debit and credit). This ensures accuracy and balance in your financial records.
Step III: Classifying Transactions (Ledger Posting)
Recorded transactions are grouped into relevant accounts, such as:
- Revenue
- Expenses
- Assets
- Liabilities
- Capital
This step helps you understand where money is coming from and where it is going.
Step IV: Preparing the Trial Balance
A trial balance is prepared to verify that total debits equal total credits. It helps detect recording or posting errors before final reports are prepared.
Step V: Adjusting Entries
Adjustments are made for:
- Accrued income or expenses
- Prepaid expenses
- Depreciation
- Outstanding liabilities
The benefit? This ensures financial statements reflect the “true financial position” of the business.
Step VI: Preparing Financial Statements
Final reports are prepared, which commonly include:
- Profit & Loss Statement (income and expenses)
- Balance Sheet (assets and liabilities)
- Cash Flow Statement (cash movement)
These statements show how your business is performing financially.
Step VII: Closing the Books
Temporary accounts (income and expenses) are closed at the end of the accounting period, and balances are carried forward to the next period.
Step VIII: Analysis and Decision-Making
The final and most important step is to use financial data to:
- Control costs
- Improve profitability
- Plan taxes
- Make strategic business decisions
Is Your Accounting Process Reliable? Take This Diagnostic Test in 2026
Always remember that your accounting process is more than just bookkeeping! It is the backbone of:
- Cash flow control
- Compliance
- Decision-making
Even profitable businesses struggle when their accounting systems are weak, inconsistent, or outdated. That’s why in 2026, senior managers of D2C companies must regularly check whether their accounting process is still reliable or needs an overhaul.
But how? Take this scored diagnostic test. Using it, you can:
- Measure the strength of your accounting process
- Understand where your system is weak
- Know what level your business currently operates at
This is how scoring works:
| Response | Score |
| Yes | 2 |
| Sometimes | 1 |
| No | 0 |
Write down your score for each question and add them at the end. Be honest while answering! Now. let’s begin the test with these “Diagnostic Questions” (with a maximum possible score of 70):
1. Transaction Recording and Documentation
| Question | Yes (2) | Sometimes (1) | No (0) |
| All business transactions are recorded on time | |||
| Bills, invoices, and receipts are properly stored | |||
| Personal and business expenses are strictly separated | |||
| Cash transactions are fully recorded |
Maximum Score: 8
2. Bookkeeping Accuracy and Timeliness
| Question | Yes (2) | Sometimes (1) | No (0) |
| Books are updated daily or weekly | |||
| Accounting software is used | |||
| Transactions are correctly classified | |||
| The double-entry system is followed |
Maximum Score: 8
3. Bank and Cash Reconciliation
| Question | Yes (2) | Sometimes (1) | No (0) |
| Monthly bank reconciliation is done | |||
| Cash book matches actual cash | |||
| Differences are resolved promptly |
Maximum Score: 6
4. Expense and Cost Control
| Question | Yes (2) | Sometimes (1) | No (0) |
| Fixed and variable costs are identified | |||
| Expenses are tracked category-wise | |||
| Costs are reviewed regularly | |||
| Budget vs actual comparison is done |
Maximum Score: 8
5. Revenue and Receivables Management
| Question | Yes (2) | Sometimes (1) | No (0) |
| Outstanding receivables are known | |||
| Invoice follow-ups are timely | |||
| Bad debts/delays are tracked | |||
| Top revenue sources are identified |
Maximum Score: 8
6. Compliance and Tax Readiness
| Question | Yes (2) | Sometimes (1) | No (0) |
| GST/TDS/IT filings are timely | |||
| Tax records are accurate and reconciled | |||
| Audit readiness is maintained | |||
| Supporting documents are available |
Maximum Score: 8
7. Financial Reporting
| Question | Yes (2) | Sometimes (1) | No (0) |
| The monthly P&L is reviewed | |||
| Balance Sheet is up to date | |||
| Cash flow is actively monitored | |||
| Financial health is clearly understood |
Maximum Score: 8
8. Controls and Risk Management
| Question | Yes (2) | Sometimes (1) | No (0) |
| Expense approvals are defined | |||
| Basic role separation exists | |||
| Data is backed up regularly | |||
| Error/ fraud risks are controlled |
Maximum Score: 8
9. Decision-Making and Financial Insight
| Question | Yes (2) | Sometimes (1) | No (0) |
| Numbers guide key decisions | |||
| Pricing decisions use cost data | |||
| Future cash needs are forecasted | |||
| Accounting supports growth planning |
Maximum Score: 8
Score Interpretation and What Does It Mean
So till now, you must have attempted this test and obtained your score. Let’s see what your numbers mean:
A) 55 to 70: Strong + Scalable
- Your accounting process is robust and reliable.
- You are well-positioned for growth, funding, and audits.
- Focus on automation and deeper financial analysis.
B) 35 to 54: Functional but Risk-Prone
- Your system works, but gaps exist.
- Errors, cash leaks, or compliance risks may appear.
- Immediate accounting process tightening is recommended.
C) Below 35: Weak + Vulnerable
-
- Your accounting process is reactive and incomplete.
- There is a high risk of cash flow issues, penalties, or bad decisions.
- Urgent restructuring of your accounting process is needed.
What to Do Based on this Diagnostic Test?
Your diagnostic score is not just a number! The real value of this test lies in how you translate insights into improvements. Instead of trying to fix everything at once, the smart approach is to:
- Identify weak areas
and
- Prioritize high-impact fixes
Need a starting point? For your reference, below is an “action plan” you can follow (depending on what your results reveal):
| Step | What You Should Do | How It Helps Your Business |
| 1. Identify Weak Areas | Review section-wise scores and highlight areas with low or inconsistent scores (mostly “No” or “Sometimes”). | Pinpoints exact problem zones like:
|
| 2. Rank by Business Impact | Prioritize areas affecting cash flow, tax compliance, and profitability before others. | Ensures you fix money leaks and risks first (not cosmetic issues). |
| 3. Fix the Basics First | Standardize transaction recording, documentation, and monthly reconciliation. | Builds a reliable foundation for all financial reporting. |
| 4. Improve Cash Flow Visibility | Track receivables, payables, and cash balances weekly. You can create simple cash forecasts. | Helps avoid cash shortages and improves payment planning. |
| 5. Automate Where Possible | Adopt accounting software for invoicing, reconciliations, and reporting. | Saves time, reduces errors, and improves real-time visibility. |
| 5. Introduce Basic Controls | Set approval limits, segregate duties, and back up data regularly. | Minimizes fraud, errors, and operational risks. |
| 6. Plan Continuous Improvement | Re-take the diagnostic every 6 to 12 months and track score progress. | Ensures your accounting system scales with your business. |
Tired of Your Weak Accounting Process? Pass the Headache to Atidiv in 2026!
So now you understand the importance of a strong accounting process. It ensures accurate financial records, healthy cash flow, and regulatory compliance. A weak accounting system, on the other hand, leads to errors, penalties, and cash leaks.
If you’re skeptical about the strength of your current setup, take this scored diagnostic test to quickly evaluate:
- How accurately transactions are recorded
- Whether books are updated + reconciled on time
- The level of tax and compliance readiness
- Cash flow visibility and control
- Reliability of financial reports
- Use of data in business decisions
Do you find fixing your accounting process time-consuming, costly, and effort-intensive? Don’t struggle with it alone! Instead, hire a leading US accounting firm like Atidiv. With 16+ years of experience, 70+ global clients, and a vast team of 390,000+ Chartered Accountants and CPAs, we can step in immediately and fix your weak accounting processes.
Get started at just $15 per hour! Book a free consultation call to learn more.
Accounting Process FAQs
1. Why should a senior manager of a D2C company evaluate their accounting process regularly?
Regular self-evaluation allows you to spot hidden weaknesses early, before they turn into:
- Cash flow problems
- Tax notices
- Poor business decisions
It also highlights what you’re doing right, so you can strengthen those areas further.
2. How often should I run an accounting self-assessment?
Ideally, you should do a detailed review once a year and a lighter check every quarter. For first-time evaluations, you may create a clear timeline for data collection and analysis.
Always remember that regular evaluations make trends visible and prevent small issues from becoming long-term accounting problems.
3. What data do I need for an accurate accounting process evaluation?
You’ll need:
- Transaction records
- Bank statements
- Invoices
- Expense details
- Tax filings
- Financial reports
Collect all data first before analyzing. You can also use automation tools to save time and keep data secure.
4. Can I improve my accounting process without building an in-house team in 2026?
Yes! In 2026, several D2C companies and consumer brands are improving their accounting processes by outsourcing to established US accounting firms, like Atidiv.
The business advantage? This saves time and gives access to expert insights without hiring full-time staff. Also, with Atidiv, you can save up to 60% costs as compared to running in-house teams.