Bookkeeping or keeping the books, as it is more commonly known, is the process of maintaining up-to-date and accurate business financial records. In other words, bookkeeping can also be defined, as a process for monitoring the inflow and outflow of monetary funds. Proper accounting helps a business to manage its cash flow more efficiently. It also helps when planning future developments for business. The most common accounting and bookkeeping errors that many business owners make are most times, the easiest to fix. The following are six accounting and bookkeeping tips to get your business back on track, and keep it there.
1. Accounting system: If you're using the cash-based method, then you're counting your income as you receive it and your expenses when you pay them. If you use the accrual-based method, you're counting your income and expenses as they happen, and not when you receive or pay them. As a Canadian, self-employed individual, you must report your business income using the accrual method of accounting.
2. Keep daily records: If you don't keep accurate daily records, you won't have any way of tracking your business' financial state. Many business owners use different record-keeping systems. What matters most is that you have a good record-keeping system, and use it every day. By setting up an accurate record-keeping system, it will only take a few minutes a day to update. Also, by having a good record-keeping system, you will be able to quickly and easily retrace your business' financial activities. This means, no skipping cheque or invoice numbers. This also means keeping separate bank accounts for your business and personal finances. This will help also create a valuable audit trial.
3. Review cheques carefully: Be sure to take the same care with checks that you take with cash. Always sign your cheques using a clear, distinct signature so not to invite forgers. Always review all canceled cheques before anyone else (this includes your bookkeeper and employees). In this way, you're more apt to catch any unauthorized cheque.
4. Obtain bank statements with month-end cut-off: This basic tip that can reap you big rewards! By coordinating your bank statement with all your other monthly records, it will make it much easier for you to reconcile your bank statements, as well as track your expenses.
5. Ensure that all the cash is accounted for by performing a bank reconciliation: You should make sure that the transactions that are recorded on your bank statements are recorded in your books, and the balance on your statement is in agreement with that in your books. Make sure that you know the amount of any cheque that you not cleared or presented cheques which will explain the actual difference between the statement and the account on your ledger.
6. Use bookkeeping software: Software is extremely vital for all but the smallest businesses. These applications make it so much easier to track your income and expenses, organize your tax documents, sum up your business' financial activities, and make it possible to backup all your records for safekeeping. If you're working with an off-site bookkeeper, make sure they're computer literate.
Tax preparation services are another useful option for tax preparation especially when calculating your income tax. Tax preparation services can often be found in kiosks in shopping centers or malls as well as in stand-alone offices. The person who prepares your taxes will walk you through a series of questions and will possibly ask to see certain types of documentation to you with your income tax. This process will assist them in developing the most thorough and accurate tax return possible.
When using an outside service, a small business can monitor the progress of the company with the reports generated by the accounting and bookkeeping agency. The small business will be able to identify all aspects of cash flow, from accounts payable to accounts receivable as well as keep track of all deductible expenses and prepare accurate tax returns. Payroll is also obviously vulnerable to security risks. There is an opportunity for fraud, including putting ghosts on the payroll.
Financial record keeping is a necessity, and this is true for businesses large, small and in-between. If your business does not have space or the capital to hire separate accounting and bookkeeping departments, consider hiring an outside accounting services firm. Your time will be better spent running the business and formulating new goals than dealing with the time-consuming burden of keeping accurate financial records. Contact M-R Fournier CPA for the best accounting and bookkeeping tips at (250) 590-8592 or email us at email@example.com. She can help you select and set up your accounting software or Excel spreadsheet and train you to use it efficiently.