Following best bookkeeping or accounting practices is essential for the longevity of your business.
What does this mean?
Accounting practices are defined as the system of procedures and controls that are used to create and record business transactions. Auditors rely upon consistent accounting practices when examining a companies financial statements.
A best practice is a method or technique that has been generally accepted as superior to any alternatives because it produces results that are superior to those achieved by other means or because it has become a standard way of doing things, For example a standard way of complying with legal or ethical requirements.
When you combine the two definitions you have BEST BOOKKEEPING/ACCOUNTING PRACTICES. As a business owner there are many things you can do to ensure you are following best practices.
The number one thing every business owner can and should be doing is familiarize themselves with their financial statements this includes your Balance Sheet, Profit & Loss and Cash Flow Statement. Learn what the numbers mean and how they affect your business.
There are many things you can do to follow best practices
Have a business plan and a budget
Know which accounting system you will use Cash Basis Method or Accrual Method
Keep your business and personal expenses separated, I am going to say this one again keep your business and personal expenses separate.
Implement internal controls
Plan your purchases
Reconcile your accounts regularly
Pay your bills on time
These are just a few things you can do to follow best practices. Often times bookkeeping is the last thing a business owner will take care of in their business, yet it is one of the most important pieces of your business. Your financial statements tell you exactly how well your business is doing. Your financials give you a snapshot of your business and if you analyse them you will be able to budget for expenses, make changes to your spending habits, you will know what services or products you offer are making you money. If your bookkeeping system is not kept up to date you really do not know the financial well being of your business making it hard to make decisions that will ensure your business thrives.
JOIN ME for a FREE webinar to learn more about following best bookkeeping practices in your business.