Accountants Gives Tips For Book Keeping

A lot of entrepreneurs just keep in mind the financial details of their business. The advantages of this approach are:

-          No need to learn a new software

-          No risk of a system crash that loses all your data

-          You can tweak your budget as needed without the use of a computer

These advantages have their corresponding disadvantages as well:

-          No clear information about the financial state of the business

-          Inability to track and keep a record of various income and expenses

-          Inability to generate meaningful reports

When there’s an absence of a system or a process, unexpected events occur that makes you miss goals and forget important paper works. To avoid these, here are practical bookkeeping tips for entrepreneurs that will surely help companies in their financial state.


5 TIPS FOR ENTREPRENEURS

Plan for major expenditures

This is helpful because it lessens the chances of missing a business opportunity or having to scramble for a loan when you lack cash. Events likes a major computer upgrade should be on the calendar a year in advance or ideally at least three years ahead. This makes you acknowledge the seasonal ups and downs, which is something overlooked by many entrepreneurs.

 Track Expenses

It is helpful to track expenses to avoid missing some tax write-offs. If a credit card is used solely for business, it is easier to keep track of expenses. Loss of receipts is less likely to happen. As a practice, all business trips, lunches, or any other events paid by cash should be recorded in your electronic or paper planner. Keeping this habit is good for taxation and audit purposes of any company.

Record deposits correctly

It is important to have a record of all the income generated by the business making you sure that you only pay taxes on money that is income. Create a system for keeping your financial activities straight, it can be a notebook, an accounting software, or an excel spreadsheet. There are a variety of deposits made by business owners that includes revenues, loans, personal savings, and the like. It is very important to avoid the trouble of you or your accountant in erroneously recording some deposits as income, consequently making you pay taxes on more money than you’ve really earned.

Allot money for taxes

It is helpful to set aside money for taxes to avoid penalties and interest levied by the IRS for not filing quarterly returns on time. Automatically set a budget throughout the year for taxes. Tax deadlines should be noted on your calendars including the preparation time for documents if needed. This will ensure you paying your dues on time.

Watch over invoices

It will be helpful to be keen on your invoices because late and unpaid bills affect your cash flow. There should be an assigned person who will track your billing. It is important to have a process of issuing a second invoice, reminding via phone call, and imposing penalties at certain deadlines. There can be a plan in place for 30, 60, 90 days late. Entrepreneurs should be reminded that it is not true that once you’ve sent out an invoice, billing is already taken care of. Every late payment of your client is an interest-free loan that hurts your cash flow.

Now let’s go to the bookkeeping tips for accountants. Regardless of the size of the business, good bookkeeping is critical to growth and success.

5 TIPS FOR ACCOUNTANTS

Create a Chart of Accounts

This is one of the first steps in developing a business accounting system. Here, the accountant categorizes that funds that received, retained, invested, or paid by the company. It often takes time to determine how detailed the chart of accounts should be. Data entry training for staff can be required if there’s too much details. However, a generic chart of accounts might not be able to provide sufficient data to be able to thoroughly examine the financial state of the company. It should be user-friendly while reflecting important information about the business.

Reconcile bank statements

When an accountant reconciles bank statements, it allows the business owners to identify the differences between the bank statement and the account holder’s records. This may include unexpected or errors in bank fees, duplicate checks encashed, and incorrect posting of transactions. Reconciling bank statements prevent issues in embezzlement. When these two records are compared, companies are able to verify that funds for the bank are reported.

Properly classify employees

It is important that workers are classified properly as employees or non-employees. Those who need to file paperwork with IRS are the freelance workers, contractors, or consultants. The paperwork is dependent on their classification as an employee.

Maintain Records

Keeping an updated daily record will help accountants create balanced accounts. These records allow the business to see available funds and verify that there is enough cash to cover any business expenses. Updating records only take a few minutes each day and will save the accountant from many hours at month’s end.

Keep an Audit Trail

To be able to pass an audit, a record of business transactions should be maintained. An effective way to document transactions is to scan to a computer all receipts and invoices, thus creating electronic copies. However, this information should be regularly backed up to ensure availability of these documents in case of computer crashes and the company is audited.

Posted by Diane Araga, on February 20, 2013 at 9:00 AM