Managing personal finances doesn’t require much work. You may have at least one checking and savings account, a retirement account, a few investments and some monthly payments and a file to save tax record receipts.
Now, when it comes to bookkeeping and business accounting services, however, there are many things to consider and with employees and customers counting on you, the stakes are higher.
There are countless pieces of advice the accounting and bookkeeping service providers can give to small and medium-sized businesses.
Most bookkeeping services culver city experts agree that to achieve success, every business must adhere to the following practices:
Bookkeeping Practices To Implement:
- Keep The Personal And Business Finances Separate
- Establish Internal Controls
- Determine The Accounting Method You May Use
- Use Accounting Software To Track Expenses
- Track Employee Time If You Want To Understand Profitability
- Manage The Accounts Payable And Accounts Receivable
- Evaluate Financial Data Monthly
- Maintain Clean And Thorough Records
- Talk To An Experienced Consultant Regularly
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Keep The Personal And Business Finances Separate
Ensure you, or the employees aren’t buying things for personal use with business funds. If funds aren’t accurately allocated, it will quickly cause cash flow issues, as well as tax filing and auditing complications.
You may even suffer legal consequences where you lose the limited liability when you pierce the corporate veil by commingling personal and business financiers.
If you own a small business, then you are likely to handle all the purchases and payments yourself. Even though you might be the only person accessing funds, you must keep the personal and business finances totally separate.
Open up separate bank accounts and credit cards for your business. Not only will this be immensely helpful during tax time, but it also prevents you from forgetting the ream of paper you purchased was for your home.
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Establish Internal Controls
Another key bookkeeping services Culver City you must consider is establishing internal controls in your company’s policies and procedures to reduce the fraud risk.
This includes dual control for processes that involve making or receiving payments of any kind. For instance, you must have one employee write the check and another reconcile the bank account and a third sign to authorize payments.
Regarding internal control, the person who opens the mail, shouldn’t be the same person who’s responsible for accounting functions.
Determine The Accounting Method You May Use
There are two standard systems of business accounting services you can use, cash accounting and accrual accounting. Cash accounting records transactions at the time of cash actually changes hands and is usually only recommended if your business deals strictly in cash payments.
The accrual method uses the matching principle to record revenues and expenses in the period they occur, regardless of when payments are made or received.
This accrual method can sometimes be a bit complicated but is usually the best choice for businesses that will be invoicing clients.
Now, you must determine which system is appropriate for your business before you conduct your first transaction.
Use Accounting Software To Track Expenses
You must keep a thorough record of all the business expenses. This means saving and recording receipts on at least a weekly, if not daily, basis.
Without a solid core accounting software, daily bookkeeping tasks will put a lot of strain on your time. In the absence of technology, this burden will only become greater as your business grows.
When you determine which accounting software you will use, don’t simply consider whether it meets the current bookkeeping services Culver City needs. You should also evaluate each software and technology for its ability to scale with your business as it grows and your business needs to expand.
Track Employee Time If You Want To Understand Profitability
For service businesses, instead of entering timesheet information into the system by hand, you can choose to automate the processes.
With time-tracking and payroll automation by adopting an automated system for capturing project-related costs and employee time you can easily feed this information into your bookkeeping system.
Manage The Accounts Payable And Accounts Receivable
Make the most of your cash on hand by impeccably maintaining your AP and AR. Pay the right amount on time to avoid late fees and to take advantage of early payment discounts. You must send invoices promptly and follow up on any past due accounts to reduce days sales outstanding.
Evaluate Financial Data Monthly
Evaluate the back office from bookkeeping to management accounting by leveraging financial statements, KPIs, management reports, etc. Build a monthly reporting package that helps you understand the drivers of your profitability and business. Always remember this tip for bookkeeping services Culver City.
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Maintain Clean And Thorough Records
Talking of taxes and compliance, are you ready for an audit? After filing the taxes, you can’t toss out your old records and start a fresh new year. The IRS has established guidelines for the length of time businesses are expected to maintain copies of the tax returns and records, such as expense receipts, applicant information, payroll tax records. Now, the general rule of thumb is at least seven years, but the real requirement varies.
Talk To An Experienced Consultant Regularly
Keep a proper list of back-office questions and check in with your business accounting services company on a regular basis- not just at tax time- to get answers and advice. This will ensure you are always tax-ready at the year-end and will help you avoid huge money pitfalls.
Finally, hiring experts can ease the process of managing accounting and bookkeeping services. They use the best practices to help you achieve success.
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