Everyday bookkeeping is a necessary practice to guarantee accountability and success for any successful business. But simply getting the job done is not enough, as it requires a fair bit of precision, methodology, and the use of proper practices for the best results possible.
These are some tried and tested practices that many successful companies follow to this day.
Keeping Personal and Business Finances Separate
It’s a common mistake that many small business owners make, using their personal bank accounts and credit cards for business purposes. If you or your employees use business funds to purchase items for personal use, you’ll notice problems in the cash flow. It’s bound to cause complications during auditing and the tax filing procedures as well.
Worst case scenario is that the limited liability option could be lost if you’re caught mixing personal and business finances. Make things easier for yourself by opening up a separate bank account with credit cards for your business.
Set Internal Controls
Internal controls for bookkeeping should never be put on a single person. Firstly, it increases the burden of responsibility on the individual and is likely to lead to errors. These can have heavy repercussions down the line.
Secondly, it also makes the system more susceptible to fraud. It’s recommended to split tasks and responsibilities, and control of the procedure among different individuals.
Split the job of writing checks, reconciliation with the accounts, and payment authorization among different employees. The paper logs will be tracked by the one opening the mail, which will later be forwarded to either the bookkeeper or the accountant.
Pick an Accounting Method
Businesses operate in two systems of accounting, either cash basis or accrual accounting. Cash accounting is the recommended option for businesses that only deal in cash. These record the transactions when the cash changes hands between parties.
The accrual method is followed by financial experts and is generally more complicated. Rather than waiting for a payment to be made or received, the accrual method applies when the transaction is performed. It follows the matching principle. It’s best to stick with one method for uniformity when deciding on your first transaction.
Using Accounting Software
While many would consider this an unnecessary expense, most modern-day bookkeeping services use software. It takes a brunt of the load out of the process, and automates many of the tasks, and can be solved in mere minutes if not seconds which would take hours doing manually. It’s far more efficient, and it allows cloud access, opening space for your workers to operate remotely to handle the bookkeeping job.
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Reach out to us today to acquire any of the services required to help decrease your expenses and increase cash flow.