The Main Objectivity
The Main Objectivity of Most Businesses is to Earn a Profit
The main objectivity of most businesses is to earn a profit. Just as a plant cannot survive without water, a business cannot sustain without a profit. The age old saying “money makes the world go round” also applies to your business. It therefore makes sense that a business’s sustainability depends almost entirely on its bookkeeping and accounting department’s work. Without a comprehensive accounting system, you’ll be operating your business in the financial dark and risk facing cash flow shortages, tax penalties and possible failure.
It is therefore a wonder why so many businesses cut corners when it comes to bookkeeping and accountancy support.
Businesses often wait until they are in trouble before seeking the help of a bookkeeper for example. Another example is that they wait until they have fines for overdue tax returns before contacting an accountant.
In this article we want to encourage you to implement a strict bookkeeping and accounting system, thereby optimizing your business to become everything it should.
Here are 9 Accounting Best Practices to consider for your business:
1. Dedicated Business Accounts
I would like to think that most companies have this step already covered, but sadly this is not true of all businesses. To make life easier in terms of tracking expenses and income, your business’s bank accounts and credit cards should be completely separate from personal accounts.
2. Accounts Payable Management
It is essential to have a watertight system for managing your accounts payable. Without this you risk firstly, not knowing what is due to be paid out, and secondly, damaging the reputation of your business due to late payment of bills, which could result in unnecessary costly penalties for late payments.
3. Accounts Receivable Management
As above, it is critical to have a system to manage your accounts receivable. This requires you to maintain an up to date ledger or list of sales invoices that remain unpaid. You need to make your customers aware of your payment terms whilst also sending them timely statements showing exactly what is outstanding at any one time with due dates shown for each invoice.
4. Training for Bookkeeper and Accounting Employees
Ensure that the staff who are responsible for running your bookkeeping and accounting procedures actually know what they are doing! Sounds obvious right – often smaller businesses use family members to limp through running these departments, often causing more chaos than if the business chose a qualified bookkeeping or for that matter outsourced the bookkeeping/accounting working to a company who is completely willing to work with you as an individual company – tailoring their services to your needs.
5. Income (Profit and Loss) Statements, Balance Sheets and Annual Financial Reports
If (and only if) your bookkeeping and accounting department keeps up to date with recording income and expenses, these essential financial reports will be a breeze to generate. You should review your income statements and balance sheets on a regular (monthly or quarterly) basis and always look at your business’s financial year as a whole with annual reports.
6. Cash Flow Forecasting
It is wise to keep a timely cash flow statement to assist you with the process of forecasting cash flow. Accounting software, used by professionals, often have this facility in-built within the programme making this job much easier to carry out. It is a good idea to keep an eye on any such report in order to avoid unforeseen cash flow shortages.
7. Tax Planning, Preparation and Filing
Tax season doesn’t have to be a cause for panic and stress if you’re always “tax-ready”. If you adhere to the steps above you will have everything you need in order to file your financial records on time.
8. Bank Account Reconciliation
Reconciling bank accounts at the very least on a monthly basis is critical. This will ensure you detect any errors in accounting, you have captured all income that has either entered the account or left the account. This would apply to credit card statements as well as bank statements. Doing this leaves the only stone unturned being cash income or expenditure.
9. Using the right software for your business
The use of accounting software, if used properly, will save time and money by automating and streamlining accounting tasks. It provides convenience and accessibility to accounting data and reports. Therefore, it is worth spending time researching various software providers that will work for your business. It may be worth talking to an accountant for their recommendations.
The responsibilities, requirements and processes needed to maintain a small or medium-sized businesses bookkeeping and accounting department can quickly become quite cumbersome, especially as a business grows. Using technology to optimize, automate, streamline and integrate as many steps of your company’s bookkeeping and accounting processes as possible will reduce your back office burden immensely and improve your financial data.