Learn to do Your Own Accounting From Day One

The thought of doing your own bookkeeping is pretty daunting right? That’s the general consensus. Having your own business involves enough work as it is. Why not just leave the accounting bit to the professionals. Fair enough. If you never want to deal with tax offices and worry about learning financials so be it. But you would be surprised how easy it can be.

These days there are superb accounting package and courses. You can sort out your tax online. Even the small things like recording invoice amounts into an excel sheet can save you precious time and money with your accountant.

The first thing you should do is set up a system where everything is filed in the right place every month. All money coming in and out should be recorded on computer, like in an excel sheet. Make sure all your files have dividers for each month. Then get your office organised with the following:

Cash Books

Keep bank statements in a file and print electronic bank statements and file them (these help to cross reference what you have recorded). At the end of the month input this onto your computer in the excel table, or similar.

Invoices

You will need 2 separate files for these. One for your company sales invoices and one for invoices which have been made out to your company. Separate each file into paid and unpaid. As the amount gets paid, mark the invoice paid with the date it was paid and move it into the paid section of your file. Again, at the end of the month input this onto your computer sheet.

Expenses

Make sure your staff and you keep all expense slips. From petrol to stationary anything spent on the company from your own pocket needs to be claimed back at the end of the month. Your driver must have a log book where mileage is recorded with the date and client visited. All petrol slips must be handed in with this log book at the end of the month.

If an employee needs cash in advance for expenses then a petty cash box must be topped up at the beginning of every month. Every time money is taken out the box, a note must be made and put in the box. The employee should sign this and they should also bring the invoice afterwards.

Again this must be recorded each month on a computer spread sheet.

Following these guidelines will prepare you for the end of the financial year calculations.

Donna Van Wyk writes on behalf of Oxbridge Academy, a provider of long distance accounting courses, among other study programs.

Common Bookkeeping Mistakes That Weigh Down On Business Profits

Bookkeeping serves as a foundation for sound financial decision making and planning and therefore it is essential that financial records are kept up-to-date. Some businesses procrastinate the mundane process of maintaining financial records because it involves a lot of time and effort. When this happens, it is better to find a bookkeeper so that you can get more time to concentrate on core business activities. Some common bookkeeping mistakes that can be avoided by paying more attention are as follows:

Inaccurate Record Keeping

Business managers can lose important receipts or ignore small expenses that seem insignificant to them and this can hinder proper maintenance of records. When its time to file tax returns or close accounts at the end of the financial year, it results in a loss of both time and money. In case of an IRS audit, you will not have the necessary documentation required for proper tax measures and this can result in fines and other expenditures when dealing with the auditor.

Wrong Categorization of Expenditures

For those of you who are not aware of bookkeeping methods and procedures, it easy to feed the wrong amounts into wrong accounts. When this happens, it is likely that income and expense accounts have the wrong balances and this could result in overvalued or undervalued profits and tax payments.

Mismanaging Liabilities and Receivables

Account receivables and payables must be properly recognized and dealt with otherwise they can result in inaccurate profit figures that depict poor cash flow planning. Separate accounts should be created for credit sales and prepaid expenses for proper tallying of accounts at closing.

Transactions Recorded In the Wrong Period

Sometimes lack of bookkeeping experience results in current transactions entered into previous reporting periods after financial statements have been generated. The resulting errors can complicate reconciliations and create a false picture of the financial position of a business.

Ignoring Bank Reconciliations

When you are engaged in a business, it is essential that personal accounts and bank accounts are kept separate to avoid confusions.  Moreover, financial records should be updated and reconciled with any external records such as bank statements on a regular basis. If this is not done, it results in errors and chances of fraudulent practices rise.

Not Keeping Data Backups

Businesses rely heavily on technology in today’s world and with software and privacy issues on the rise, it is essential that backup is maintained of all the important information related to the business. System failures or crashes can result in a loss of important information which can be deleterious to your business’s health. It is better to be prepared for such unfortunate circumstances by keeping updated backups on an offsite location.

Keeping Employee Categories Separate

With increased dependence on contractual employees, it is essential that separate records are maintained for different employee categories.  With accurate classifications and cost allocations, workers’ compensation, insurance payments and tax payments will not be wrongly computed.

Petty Cash Mismanagement

All businesses have small amounts of cash that have no ‘attached’ explanations. This petty cash can be properly managed when there is a system in place to keep track of cash transactions.

Losing track of Reimbursable Expenses

Sometimes, business owners pay for certain expenses out of their personal funds but fail to record them because of a lack of such a system. This can accumulate to profit losses and tax deductions that would otherwise have not happened.  With a proper company policy to keep track of legitimate business expense claims, these expense claims can be reimbursed.

Find a bookkeeper who can prevent such mistakes so that you can effectively and successfully manage your business.

 

Anthony Azevedo, CPA is the managing member of EZCFO a bookkeeping company specializing in human resource, payroll, and employer solutions.