Managing your finances takes little effort. You have at least one checking and savings account, a retirement account, a few investments, a few monthly payments, and a file to store receipts for tax filings. However, when it comes to Bookkeeping Services Dubai and accounting for business purposes, there is much more to consider, and with employees and customers relying on you, the risk is much higher. Nevertheless, bookkeeping and accounting service providers can offer small and medium business owners a wealth of advice.
12 GOOD ACCOUNTING PRACTICES YOU SHOULD DO
KEEP YOUR PERSONAL AND PROFESSIONAL FINANCES COMPLETELY SEPARATE
Ensure you or your employees do not purchase items for personal use with company money. If money is not allocated correctly, it quickly leads to cash flow problems, tax reporting, and audit complications. You can also suffer legal consequences of losing “limited liability” if you mess with the corporate veil by mixing personal and commercial sponsors.
You can handle all purchases and payments yourself if you have a small business.
However, while you may be the only one with access to funds, you should always separate your personal and business finances.
You should open separate bank accounts and credit cards for your business purposes. Not only is this extremely useful at tax time, but it also prevents you from accidentally forgetting that the paper ream you buy is intended for household use.
ESTABLISH INTERNAL CONTROL
It would be best to establish internal controls in your company’s accounting policies and procedures to reduce the risk of fraud. This includes thorough vetting processes involved in making or receiving payments. For example, you should have at least one employee write checks, another employee reconciles bank accounts, and a third employee signs the payment confirmation.
Regarding internal control, the person who opens the letter must not simultaneously be responsible for the accounting functions.
The mail opener must keep track of the checks in a physical journal showing which checks were received and when. Checks should be given to the bookkeeper or accountant, along with a copy of the list. This includes the person who opened the letter and the bookkeeper or accountant.
DETERMINE THE ACCOUNTING METHOD YOU WILL USE
There are two standard accounting systems that you can use for your business, cash accounting, and accrual accounting. Cash accounting records transactions as cash changes and is usually only recommended for businesses that deal entirely in cash.
The accurate method uses the matching principle to recognize income and expenses for the period they occur, regardless of when the payments are made or received. The accurate method can be more complicated, but it’s generally the best option for any business that will bill customers.
Another acceptable option is modified cash accounting, which falls between cash and accrual accounting. Modified cash accounting means you are doing cash accounting, except that you invoice accounts payable and invoice customers, meaning you have accounts receivable on your books.
It would help if you determined which system is right for your business before making your first transaction.
USE ACCOUNTING SOFTWARE TO TRACK EXPENSES
You must keep a complete record of all your business expenses. This means recording and posting receipts at least once a week, if not daily. Without a solid basic accounting software system like QuickBooks’ and cloud-based costing technologies, day-to-day accounting tasks take up a lot of your time. With using technology, this burden will increase as your business grows.
So when determining which accounting software you will use, don’t just wonder if it will meet your current accounting needs. You should also evaluate every software system and technology for its ability to match your business as it grows and your office might need to grow.
TRACK THE TIME OF YOUR EMPLOYEE IF YOU WANT TO UNDERSTAND YOUR BOTTOM LINE
For service companies:
Instead of manually entering timesheet information into the system, you can choose to automate these processes. With time tracking and payroll automation, you can easily integrate this information into your accounting systems by applying an automated system to capture project costs and employee time. Mine. When payroll is run for your business, it’s automatically posted to QuickBooks, pulling the specified information from what’s on the timesheet. In addition, we’ve set up coding time at the business unit, client, or job level so you can generate real profit reports by tagging each job.
Then you can:
- Add custom fields to work forms
- Follow the sales representative.
- View profits by industry, team, sales rep, and marketing campaign.
OPTIMIZE YOUR CHART OF ACCOUNTS
Utmost businesses have a simple, alphabetical map of accounts to track charges for duty and compliance purposes. However, using your chart of accounts as the basis for a management accounting tool is best. To help you track customer acquisition costs, break-even points, and spending ROI.
Consolidating your sales and marketing accounts will help you keep track of the costs of acquiring a customer. Separating your general and administrative (G&A) costs will help you know how much it costs to maintain. Product or industry-specific maintenance and spending shows discretionary expenses you can cut during a recession.
DILIGENTLY MANAGE ACCOUNTS PAYABLE AND RECEIVABLE
Make the most of your cash by maintaining your AP and AR perfectly. Pay on time to avoid late fees and take advantage of early payment discounts. Send invoices quickly and track all past-due accounts to reduce the number of days of unpaid sales.
UPLOAD DAILY BANK TRANSACTIONS, RECONCILE BANK STATEMENTS REGULARLY, AND RESOLVE ISSUES QUICKLY
Keep your bank statements manageable. One should Balance them regularly and resolve any kind of discrepancies immediately. Please take a minute to review them when they arrive to make sure there are no unauthorized payments. Business bank accounts are subject to strict regulations limiting the time incorrect electronic transactions or paid checks can be resolved.
REVIEW YOUR FINANCIAL DATA MONTHLY
Migrate your back office from accounting to management accounting by leveraging your financial reports, management reports, and KPIs. Create a monthly report package that helps you understand the drivers of your business and profitability.
PLAN YOUR TAXES THROUGHOUT THE YEAR
Stay in regular contact with your tax accountant to ensure you’re doing everything you need to keep records and track expenses so that you have everything in order when it’s time to file. Need. Staying organized regarding taxes will also help you make strategic decisions throughout the year to reduce your overall tax burden and avoid costly penalties.
KEEP CLEAR AND COMPLETE RECORDS
Speaking of tax and compliance, are you ready for an audit? After you pay your taxes, you can’t throw away your old filings and start a new year. The IRS has established guidelines for how long businesses are expected to keep copies of their tax returns and records, such as expense receipts, applicant information, records payroll taxes, and activity records. The general rule is at least seven years, but actual requirements vary.
TALK REGULARLY WITH AN ACCOUNTING CONSULTANT
Keep a list of office support questions and contact your accounting or bookkeeping firm regularly — not just at tax time — for answers and advice. This will ensure that you are ready to file your taxes at the end of the year and will also help you avoid major financial pitfalls.