Proper accounting is vital to the success of any business whether big or small.
Public companies have the added responsibility of being held accountable to shareholders and boards. Small businesses on the other hand need to practice good accounting to ensure that the company is financially viable and tax compliant especially when seeking investments.
Accounting procedures can be onerous but keeping your books in good order will be beneficial to you and your business in the long run. No one wants to have to pay costly fees for non-compliance.
Keep Proper Financial Records
Maintain accurate and timely records of revenue (including invoices), expenses and payroll. You can do this by using online services such as QuickBooks, FreshBooks or Wave Accounting which offer free and paid options or hire a financial accountant.
Whichever method you choose, be sure to keep your records in proper chronological order and store them in a secure location whether online, offline or both.
Also, there may be some unusual financial transactions throughout the life of your business so be sure to add notes on any such document to clarify for others. This comes in handy especially if the business is audited.
Secure Your Records
By law, you are required to retain all financial documents for at least 7 years and up to 10 in some instances. You should store hard copies of financial records in a secure location accessible only to authorized personnel as well as free from the elements and insects or termites. You wouldn’t want to go looking for a file only to find it eaten by bugs, would you?
Similarly, guard electronic copies of your business’ accounting information with relevant encryption methods.
Monitor Your Records
You should have a basic understanding of business accounting so that you understand what the figures mean for your business.
For example, monitoring your accounting data can allow you to keep track of delinquent customers or quickly recognize when your input costs have increased. Additionally, knowing your monthly profit margins can help you to adjust your prices or processes thus enabling you to make strategic business decisions on a timely basis.
You put a lot of work into managing and growing your business so practice good accounting because the buck stops with you. You are responsible as the owner for adhering to tax requirements and reporting guidelines and since paying taxes is mandatory in every country, it is recommended that as an entrepreneur you get acquainted with the subtleties.