Accounting Best Practices for Small Business

Accounting Best Practices

Entrepreneurs and small business owners generally agree that one of the most intimidating tasks in running a business is financial management and accounting. We find it so intimidating that the moment we have our invoices, bills, VAT returns and other accounting documents in front, we go insane sorting those entries and entering into our books of account, unless, you are an Accountant by profession.

However, if you want your business to succeed, you cannot ignore the fact that accounting & financial management is an integral part of the entire business and it is extremely important to keep your books of account accurate and in proper order at all the times. If you follow these accounting best practices (or financial management best practices), handling your business will be a lot easier and result in less insane state.

Prepare a business plan

A good business plan guides you through every stage of starting and managing your business. You’ll use your business plan as a roadmap for how to structure, run, and grow your new company. It’s a way to think through the important aspects of your business. a business plan will help you project and estimate future expenses and the amount of income or revenue needed to sustain your business operations.

Business plan and budget can help you get funding or bring on new business partners. Investors want to feel confident that they will see a return on their investment. Your business plan is the tool you will use to convince people working with you or investing in your business.

Identify accounting method

An accounting method refers to a set of rules that a companies follow when keeping their financial records and reporting financial transactions. The transactions are recorded in a manner that accurately reflects correct income. The two basic methods of accounting are cash accounting and accrual accounting.

Cash accounting records transactions at the time cash actually changes hands and is usually only recommended for companies which do business strictly in cash payments. 

The accrual accounting method uses the matching principle to record revenues and expenses in the period they occur, regardless of when actual transaction (payment transfer) occurs. The accrual method can be a bit more complicated, but is usually the best choice for any business which will be invoicing customers.

You should determine which system is appropriate for your business before you conduct your first transaction.

Separate your personal and business finances completely

Ensure you, or anyone in your company, are not buying things for personal use with business funds. If funds are not accurately allocated, it will quickly cause cash flow issues, as well as tax liability and auditing complications.

If you own a small business, then you likely handle all of the expenses and payments yourself. Even though you might be the only person accessing funds, you should always keep your personal and business transactions completely separate.

Set up separate bank accounts and credit cards for your business. Not only will this be immensely helpful in tax liability, it will also prevent you from accidentally forgetting that the purchase was actually for home use.

Use accounting software to track expenses

You should keep a thorough record of all your business transactions. This means saving and recording receipts on at least a weekly, if not daily, basis. Without a solid and cloud bases accounting software system (like AcuSheet), daily accounting tasks will put a major strain on your time. Without using technology, this burden will only become greater as your business grows.

When you determine which accounting software you will use, do not simply consider whether it meets your current accounting needs. You should also evaluate each software system and technology for its ability to scale with your business as it grows. 

AcuSheet is perfect fit for small businesses to large organizations.

Reconcile bank statements regularly

Do not let your bank statements pile up. Balance them regularly and resolve any inconsistency immediately. Modern accounting software lets you import bank statement directly. Take a minute to review when they come into make sure there are no unauthorized payments.

Use reports and evaluate your financial data frequently

Elevate your back office from bookkeeping to accounting management by leveraging your financial statements, management reports and KPIs. Build a monthly reporting package that helps you understand the drivers of your business and profitability.

AcuSheet can help you generate key business reports in no time. You can also filter it according to your need.

Plan for taxes throughout the year

Keep in touch with your tax advisor on a regular basis to make sure you are doing everything you should to maintain records and track expenses, so when it comes time to file tax return, you have everything you need already organized.

Staying organized, with regard to taxes, will also help you make strategic decisions throughout the year to reduce your overall tax burden and avoid costly penalties.

AcuSheet generates VAT return automatically and notifies you of your tax liability on time (This feature is currently available in GCC only)

Keep clean and thorough records

Speaking of taxes and compliance, are you ready for an audit? After filing your tax returns, you cannot toss out your old records and start a new year. Every government authority has established guidelines for the length of time businesses are expected to maintain copies of their tax returns and records, such as invoices, expense and operational records. The general rule of thumb is at least five years, but the actual requirements vary.

How AcuSheet can help streamline your accounting process

AcuSheet comes with range of automations which helps you save time and maintain your books of account securely on cloud. It also generates VAT returns automatically and notifies you of your current VAT liability. 

AcuSheet also offers multi currency accounting – the means you can create transactions in foreign currency and AcuSheet handles the conversion into books of account automatically.

There are many more features of AcuSheet you can explore on features page

Mahdi Bhojani

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