Looking to brush up your accounting skills? Want to know why or how good accounting skills can benefit your business? Continue reading to find out.
Proper accounting is one of the most crucial aspects and practices that keep any business organization running on the course towards its goals and aims. Yet approximately one out of every three businesses fails due to poor accountancy which is worrying. Since all the operations of most organizations are constantly evolving, it is salient to know how to make comprehensive records of all financial business transactions. Finance gives any business its power. Thus proper accountability will yield a successful business. No matter how small your business set up may be, it is ideal to be accountable as you may soon be dealing with a large amount of money, assets or liabilities.
If your business is so small that you can’t afford the services of a professional accountant, these tips are for you to keep you running in the financial green zone.
Create a Bookkeeping Structure
Bookkeeping is the practice of taking daily financial records that involves all transactions such as sales, purchases, payrolls, drafting of bill payments, preparing sales invoices and to some extent, development of financial statements. However, bookkeeping should not be confused with accounting, as bookkeeping involves mainly making data entries of financial transactions. You can be your own business bookkeeper if you are starting your business on a low financial scale by using simple tools such as spreadsheets on Excel.
Plan Your Profit and Loss Statement
Making a profit and loss statement for any business is very crucial as it helps to give an idea of the profits made or losses incurred. A profit and loss statement can be prepared to cover a period of weeks or months. It gives your business a financial account of its revenues, cost and expenses. It is pretty much a powerful tool that forecasts if your business can generate its revenue or if you need to increase profits by investing a little more.
For a small business outfit, the profit and loss can be calculated by subtracting Cost of Goods Sold (COGS), Operating Expenses (OPEX), and all Tax expenses from your Revenue. Revenue – COGS – OPEX – Taxes = Profit or Loss.
Open a Business Bank Account
Open a business account bearing the identity of your legally registered organization. This is where all your funds are to be kept. A budgeted amount set aside for the running of your business should be kept here, different from all forms of personal accounts to allow for easy tracking of expenses or income
Use The Same Account Numbers for Transactions
Generate a common account number that is registered using your business name where all payments and other financial transactions can be made. Also, an account is needed where financial statements can be requested when needed instead of raising different invoices that will become a burden for your accounting employees to collate and recorded.
Prompt Collection of Sales Taxes
Ensure that you make the collection of sales taxes (e.g. VAT / GST) immediately at the time of sales. This helps to avoid the payment of substantial sales taxes as a result of accumulation. Delayed tax payments can also attract fines payable by your organization.
Keep an Accurate Invoice
An invoice is a document issued by a seller to the payer of goods or services rendered, as well as indicating the cost and quantity rendered. Accurate invoicing allows you to track and keep clear records of clients, showing their transaction history if their payment agreements (such as payment duration) are met. Learn to close an invoice after transactions are completed and avoid adding multiple items to invoice with a transaction that has already been paid.
Organize Receipt Keeping
All receipts such as sales, procurement or purchases should be kept in an organized format that comprises of categorization. Whether the transactions are done electronically or not, it is also vital to keep the receipt in an electronic format. Make scanned copies of receipts and date them accordingly, using appropriate folders to aid future references. Keeping receipts helps your accountant to calculate expenses more easily by picking up files or documents where receipts are stored. Make printouts of electronic transactions to serve as an alternative document in case of electronic failures.
Use apps for Small Business Owners
There are many handy apps designed to aid with the financial operations of small businesses, depending on the category of the business. Since the modern day business relies on digitalization to attain success, it is worthwhile to create a digital environment where there will be a strong presence of organization. A strong social media presence will not only improve your brand awareness but will also help to limit expenditure when getting your products or services across to your customers effectively. Some useful app include;
Awareness campaign apps such as Facebook (preferably a business Facebook account), Twitter, Instagram, Pinterest. These apps can enhance how you make your business brands known to your target audience through blogs or posts, multimedia and infographics.
Business planning apps such Microsoft Planner that helps to organize your works such as planning, assigning of tasks, files sharing, live chats about current works and getting updates. For on-the-go business owners, it works as a great app, especially when making use of the ‘my task’ view, which has the ability to provide a comprehensive list of all tasks and their statuses across all plans.
Download Bank Records on A Daily Bases
This practice will help your accounting become more comfortable and faster, especially in preparing monthly financial reports. Affordable software such as the Xero, Sage or QuickBooks can automatically download daily transactions from the bank, and it also allows you to quickly spot fraudulent transactions that are not authorized.
Establish a Payroll System
If you are a small business, you need to design a payroll system after determining your employees. However small your payroll list may be, have it organized by listing all employees, stating the amounts paid and dates of payments. Make a schedule for freelance workers and any contractors.
Determine Means of Getting Paid
Nowadays, many online businesses are making use of electronic methods of payment. You too can jump on the bandwagon. Start by determining if credit cards are accepted and if you require a third party payment option such as a merchant account.
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