4 Accounting Tips for Business Owners
Although accounting may seem intimidating at first, understanding your business’ financials is essential to running a successful operation. Accounting for business owners is a complex field with many nuances, but there are key practices you can adopt to ensure that your finances are in order before making a trip to the accountant. Let’s explore four accounting tips that will help you stay on top of your business’ finances.
1. Create a Comprehensive Chart of Accounts
A chart of accounts is a list of all the accounts your business uses to categorize transactions(investopedia.com). Creating a comprehensive chart of accounts ensures that you can accurately track the money flowing in and out of your business. For example, you may have separate accounts for revenue, expenses, taxes, and payroll. Business owners that keep track of the items in each of these categories gain insights into where the money is going and how it’s being used.
Understanding the Components of a Chart of Accounts
A Chart of Accounts is typically composed of three components:
● Account Number: This number is used to identify each account.
● Account Name: This name describes the type of account.
● Account Type: This type indicates the kind of account and how it behaves.
Maintaining Your Chart of Accounts
It is important to keep your Chart of Accounts up to date at all times. Any changes in your business should be reflected. In order to ensure accuracy it is important to review your Chart of Accounts periodically and make necessary changes.
Accounting software can help you easily maintain your Chart of Accounts. This type of software allows you to enter and manage your financial data quickly and accurately. It also helps to ensure that your financial statements are accurate and up to date.
Here are the top accounting software options (g2.com)to help you streamline and automate your business’ financial information:
● QuickBooks Online
● Desktop Pro
● Sage Intacct
● QB Enterprise
● SAP Business One
If you have any questions about your Chart of Accounts, it is best to seek professional assistance. An experienced accountant can provide you with valuable guidance and advice on how to maintain your Chart of Accounts.
2. Keep Detailed Records
It’s important to keep detailed records of all your financial transactions. This includes everything from invoices and receipts to bank statements and payroll records. Having detailed records will help you track your finances more accurately and ensure that your business is compliant with the relevant laws and regulations. With a well-organized bookkeeping strategy, business owners can gain insight into the financial health of their business and make better decisions.
When time is of the essence, business owners can benefit from working with a bookkeeper to keep accurate and efficient records.
Benefits of Accurate Bookkeeping
● Gain a Clear Financial Overview — Accurate bookkeeping gives business owners a clear overview of the financial health of their business. They can view their current financial position and identify where their money is coming from and going to.
● Simplify Tax Preparation — Keeping accurate records of transactions makes filing taxes easier and faster. Business owners can easily provide the required documents to their accountants and reduce their tax filing burden.
● Facilitate Loan Applications — Accurate records of financial activity makes it easier for business owners to apply for loans from banks or other financial institutions. Most lenders will require detailed information about your business’ financial status to determine if you are eligible for the loan.
Business owners need to make sure they have a comprehensive bookkeeping system in place. Accurate and organized bookkeeping records can provide invaluable insights into the financial performance of their business. If you’re looking for help with your bookkeeping in Vancouver or Calgary, contacting MMT Chartered Professional Accountants is a great place to get started.
3. Perform Regular Reconciliations
Performing regular reconciliations is a must for any business. Reconciliations involve comparing your internal records to external records to make sure that the numbers match up(investopedia.com). This helps to ensure that your books are accurate and that you’re compliant with the relevant laws and regulations. It’s a good idea to perform a reconciliation at least once a month.
Benefits of Regular Reconciliations
● Identify Discrepancies: Regular reconciliations can help to identify discrepancies and errors that may have gone unnoticed otherwise.
● Financial Insight: By tracking financial transactions and data, owners can gain valuable insight into their finances and understand their financial position.
● Avoid Costly Mistakes: By finding and correcting errors, owners can avoid costly mistakes that could cause serious financial repercussions.
Tips for Performing Reconciliations
1. Set up a timeline for reconciliations and stick to it.
2. Organize and review your financial data.
3. Double-check all transactions.
4. Keep records of all reconciliations.
5. Ensure all data is accurate.
4. Hire a Professional Accountant
It’s always a good idea to hire a professional accountant to help manage your business’ finances. A good accountant can provide invaluable guidance and advice on how to best manage your finances and help ensure that your business is compliant with the relevant laws and regulations. Hiring a professional accountant can save you a lot of time, effort, and money in the long run.
Chartered Professional Accountants support a business by providing professional accounting and bookkeeping services. Contact MMT Chartered Professional Accountants for bookkeeping and other specialized accounting services to help your business grow.