6 Accounting Tips Your Small Business Needs to Know
Because of the limited amount of funds that are available, small business owners have to wear a lot of different hats when they first get their company off the ground. So it is common for them to have to do their own accounting work until they can afford to hire a professional to handle it for them. This is no easy task to accomplish though because one mistake could end up breaking the bank. That is why it helps to keep the following six accounting tips in mind:
Reconciliation shouldn’t just be used for bank statements. It must be applied to all of the general ledger accounts that a company has. And it has to be done on a monthly basis for it to be effective. Errors that are left for too long end up getting passed along into other accounting cycles where they are difficult to find.
Track Expenses With Paper
Don’t rely on electronic statements for information regarding bills or other expenses because they can sometimes be wrong. Always have hard copies of them available in files that can be organized according to what type of expense they are and the date that they occurred. This will ensure that they are easy to find in case of an audit.
Get a Good Accounting Program
A multi-tasking accounting software can save hours of work because it takes care of most of the reports and entries. And it doesn’t have to cost a lot for it to be effective. Free-ware accounting programs are easy to download, and they are just as accurate as the expensive versions. Just remember to always back up everything onto a removable drive each night.
Use Caution With Sales Tax
The easiest way for a small company to go under is to not pay enough sales tax each month. So it is crucial that daily, weekly, and monthly reports get printed and reviewed for accuracy before the final payment is made to the tax office. Business owners who don’t know how to handle sales tax issues can get help from their state comptroller’s office.
Close Your Books
Closing the books on a monthly basis is important for reducing fraud and errors because it doesn’t allow a person to tamper with the numbers without doing a journal entry that can be tracked. The closing has to be done on the last business day of the month though, so it will include all of the expenses and income. This process can take a few hours to do because all the information has to be reviewed and printed out. But it is worth it because it keeps the accounting work accurate.
Stay on Top of Entries
All deposits and checks have to be recorded immediately. If even one of them is forgotten, it will throw off the bank account balance. And this can cause bounced checks and late fees.