Money makes the world and your business go around. So, it follows that a business's well being depends almost entirely on its bookkeeping and accounting department's process, policies and procedures.
Without a comprehensive accounting system, you’ll be operating your business in the financial dark and risk facing cash flow shortages, internal fraud, tax penalties and possible failure.
Transform your business by implementing a robust bookkeeping and accounting system and optimizing it into a powerful financial engine that will drive business growth.
Don't Overlook These 13 Accounting Best Practices
When establishing or overhauling your company's accounting system, process, policies and procedures, be sure to cover all of your back office bases with these thirteen business bookkeeping and accounting essentials.
1. Dedicated Business Accounts
Most companies have this step covered, but it's worth mentioning. For the sake of tracking expenses and income, your business's bank accounts and credit cards should be completely separate from personal accounts.
2. Expense Management
You absolutely must have a system for managing employee expenses and reimbursing them for these expenses. Your system should have processes in place for recording the expense (receipt tracking), noting the purpose of the expense and also recording when the expense is reimbursed.
If your employees do not have access to business credit or debit cards, then you will also a need to develop a standard process for expense reporting and requesting reimbursement.
In addition to tracking employee reimbursement with regard to expenses, you should also categorize expenses for management reporting and tax filing purposes. To do this, you should establish two separate charts of account: one organized for taxes and one organized for management accounting.
3. Accounts Payable Management
Without a thorough system for managing accounts payable, you risk your business's reputation and the unnecessary expense of late fees and interest. Pay all of your bills on time or early whenever a discount is offered for timely payment.
4. Accounts Receivable Management
Managing accounts receivable requires you to establish systems, policies, and procedures for evaluating customer credit, educating customers on your payment expectations and process, generating invoices, accurately and promptly invoicing customers, tracking received payments and following up on past due accounts.
5. Training for Bookkeeping and Accounting Employees
All new staff should be properly trained regarding any bookkeeping and accounting procedures that will affect them. Employees working in the bookkeeping and accounting department should understand any of the processes for which they will be responsible or any procedures for which they will act as backup. Employees outside of the bookkeeping and accounting department should receive training to ensure they are aware of expectations regarding expense tracking, time tracking and payroll.
6. Income (Profit and Loss) Statements, Balance Sheets and Annual Financial Reports
When your bookkeeping and accounting department keeps up with recording expenses and revenue, these essential financial reports should 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.
Implement systems to ensure the accurate and timely generation of all financial reports which allow you to measure and track important financial metrics.
7. Cash Flow Forecasting
You should also keep a timely cash flow statement to assist you with the process of forecasting cash flow. Unforeseen cash flow shortages can put your business in a real bind, forcing owners to make unplanned financial decisions, such as taking out high interest loans or selling equity, to keep the business afloat.
Cash flow forecasting allows you to predict when cash flow shortages might occur and make sound financial preparations to avoid the problem before it occurs.
8. 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 organize your back office to plan and prepare for tax season throughout the year, then you should have everything you need and all of your records on file come time for tax filing.
9. Sales Tax Management
Speaking of taxes, quarterly and year-end taxes are not the only taxes which can be a cause for stress in the bookkeeping and accounting department; sales taxes occur every day. Businesses that deal with sales tax must keep track of changing rates, holidays, exemptions and sets of rules which differ between tax jurisdictions. Establish a proactive plan and system for accounting and keeping up with sales taxes.
10. Internal Risk Mitigation
Your bookkeeping and accounting department absolutely must have a system for mitigating exposure to the risk of internal fraud.
Divide duties, require checks and balances and establish dual control to limit any one person's access to accounts and information.
11. Bank Account Reconciliation
Reconciling bank accounts in a timely fashion is critical. This will ensure you detect any errors in accounting with time to correct them and signs of potential fraud right away.
12. Data Back-Up
Back-up your data. Cloud accounting provides some protection, but you should have plans in place for potential outages. You should also scan paper documents to have digital back ups in the event of an emergency in the office.
13. Back Office Automation
Technology solutions have been developed to overcome almost every challenge of the modern bookkeeping and accounting department. Be sure you research before selecting one product over another. Look for scalable features and ongoing support, but don't be afraid to make use of modern bookkeeping and accounting tools.
Streamline, Automate and Integrate Your Smart Back Office with Technology
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. With cleaner, up to date financial information, you can track your company's key performance indicators to perfect your business plan and operations.
When you pair a core accounting system, like QuickBooks, with smart time-tracking, expense tracking, payables and invoicing software and applications, your back office transforms from a compliance and tax machine to a strategic financial center.
Equipped to help you make smarter business decisions, your bookkeeping and accounting department can help you strategically cut costs, optimize pricing and processes, make the most of your marketing dollars, improve profitability and grow your business.
GrowthForce Pairs Tried and True Processes with Tried and True Technology
Partnered with GrowthForce, your company will have access to a team of highly experienced, trained and certified bookkeeping and accounting professionals.
We will help you design and establish smart and efficient bookkeeping and accounting processes that work for your business by saving you time and money and providing you with the financial data you need to make strategic decisions on behalf of your company.