Best Bookkeeping Practices for Business Success
Regardless of the size of a business, bookkeeping is essential for its financial success. It ensures a business runs smoothly and allows business owners to make better decisions based on the financial position and forecasting. Bookkeeping is the basis of accounting and, therefore, it must be done accurately every step of the way.
Here are some of the best bookkeeping practices that can help a business succeed:
Have internal controls in place
Internal controls are essential, no matter how large or small your business. These controls reduce the risk of fraud. Dual control of processes with regard to making and receiving payments is one of the most widely-implemented internal controls in businesses. Let’s say one employee writes out the cheque, another does the bank reconciliation, and a third employee authorizes the payment.
Optimize the chart of accounts
Most businesses have a chart of accounts where all the respective accounts the business deals with are listed. A chart of accounts makes it easier to locate files and track expenses for tax and compliance purposes. The chart of accounts should be used as the foundation of a management accounting tool. It should be used to keep track of breakeven points, return on investment, and other important financial ratios and information.
Monitor account payables and receivables closely
Most businesses rely on payables and receivables since buying and selling are generally done on credit. Utilize the cash on hand by maintaining your account payables and receivables efficiently. Pay your creditors the right amount at the right time to take advantage of discounts and prevent any late fees. Likewise, send invoices promptly and follow up on any past dues to reduce your day’s sales outstanding.
Bank reconciliation is essential
Bank reconciliation is when a business matches their bookkeeping entries to the transactions recorded by the bank to double-check the entries. Often, bank reconciliation reveals errors made during bookkeeping and any omissions and transposition errors. It’s essential to reconcile bank statements on a daily basis to rectify any issues immediately.
Employ a bookkeeping service
Accounting services are useful for businesses that don’t have a dedicated finance team. There are many benefits to employing a third party to take care of your company’s bookkeeping. Accounting services have employees who specialize in various industries and know the best practices when it comes to bookkeeping. It also reduces the chances of fraud.
Faber is an accounting firm that has been in the industry for over 20 years now. We have worked with corporate clients of all sizes, providing them with accounting services, tax planning, and consultancy services. Our team works tirelessly to help clients achieve success. Get in touch with our experts in Edmonton, Alberta today at 780-432-5262 and book an appointment.