Accounting is an essential function for the smooth running of any business, and we can’t emphasise more on it. It is important to pay attention to the fine details and be precise in the bookkeeping process as well. Accounting is a complex and essential process in which bookkeeping acts as a foundation. To have the right accounting process in place, you must make sure that you know the basics of the bookkeeping process and ways to conduct it. Bookkeeping is concerned with the recording of day to day transactions, and it focuses on recording the transactions properly and effectively according to the rules of accounting after this step one has to summarise all the transactions and then communicate the same with the stakeholders.
You can streamline your accounting process with the following checklist –
1. Knowledge of Basic Accounting Principles:
Even if you have an in-house bookkeeper or accountant who looks after your accounting and bookkeeping process, it is best to have knowledge of basic accounting principles as it helps you in streamlining your accounting process.
2. Dedicated Business Bank Accounts:
This is a no brainer, but it is important to remind people who are starting out, especially sole traders. Sole traders don’t legally need a separate account. Still, it is definitely recommended as it helps in keeping your personal and business finance separate which may otherwise cause issues in the future.
3. Use of Accounting Software:
Accounting process has many tasks which are heavily loaded with paperwork, from outgoing invoices to incoming invoices, bank transaction, and so much more. Most accounting software comes with the options of automating invoicing, bank transactions, payable reminders, tax calculation, etc., which reduces the paper load of an organisation.
4. Accounts Receivable Management:
It is important to have a system in place which enables you to reduce the turnaround time of invoice payments and thereby reducing the chances of bad debts. If you are doing manually, you have to be consistent and precise in record keeping, collection of dues as well as following up on past due accounts. You can reduce the stress by automating the process with the help of MYOB, QuickBooks, Xero, and similar accounting software which creates invoices and also send the same to customers with an online payment option or reminders in case of past dues.
5. Accounts Payable Management:
While managing receivable will help with cash inflow, it is also crucial to pay attention to accounts payable. Lack of efficient accounts payable management leads disrupt in cash saving policies, losing the advantage of credit period, which further deteriorating vendor relationships. Set up a system to make timely and accurate payments to avoid such situations, paying up in time might also benefit you as some vendors offer discounts on early payment.
6. Cash Flow Forecasting:
Accounts payable and receivable both impact your overall cash flow which ultimately affects the functioning of your business. Conducting cash flow forecasting will enable you to prepare for any possible future shortfalls and help with efficient liquidity management. Make sure you have a cash flow statement prepared periodically to help in the preparation of cash flow forecasting. This will make borrowing and investment decisions less complex for you.
7. Payroll Management:
Payroll adds up to a major monetary expense that a business spends on. While business nowadays outsources a large part of their non-core activities but payroll expenses relating to operating functions, it is unavoidable. One has to efficiently manage their payroll, taking note that payroll is not just about the compensation but also added benefits that the business has to provide to its employees.
8. Expense Management:
Employee benefits also include expenses like travel expenditure, stationaries, meals, etc., which are not part of their salary structure. Additionally, there are other petty expenses as well that a business incurs and it needs to be categorised. Doing so will help you efficiently track your expenses and reduce errors.
9. Account Reconciliation:
This step of the accounting process is very helpful for the business to detect any errors in accounting. We suggest conducting accounts reconciliation every time you receive a bank statement, if not, at least every week. You should increase the frequency according to the number of transactions, businesses with a large number of transactions have to reconcile on a daily basis. The use of accounting software is advised in such cases as it will make the whole process less tedious.
10. Synergy Among all Departments:
Having an efficient accounting function in place just in your accounts department will not enhance your overall accounting process. It is equally important that all other departments are also aware of what is expected out of them. This will make the task of the accounts department much easier as they do not have to constantly guide or assist other departments with what is required of them in the accounting process.
11. Preparing for Tax in Advance:
Tax season is dreaded by many, but it doesn’t have to be the same for you. It just requires you to plan and start preparing for your tax ahead of the tax season, preferably throughout the year. This will make tax preparation, filing, and return a breeze for you.
12. Financial Statements
Preparation and review of financial documents such as income statement, the balance sheet should be done on a regular interval. Doing so will enable you to produce precise financial reports as and when required providing you with required financial information.
Accounting is a never-ending process, and it is important to optimise it in a manner in which there is zero error as every financial information is critical for the business and presence of error in one place will definitely affect multiple places. Choosing the right accountant for your business will make a noticeable effect on this matter.