5 Hacks to Foolproof Your Accounting
Many entrepreneurs go into business for a variety of reasons. It could be a hobby turned passion; a need for money; or to help fill a need in their society. Regardless of the reason, when they started their business, managing their books did not seem like it would take up the majority of their time. But they will soon learn accounting is closely intertwined with the very essence of business.
Like all things, nothing is truly perfect but in this article, we share 5 hacks to foolproof your accounting.
Establish a good foundation for your books
You can achieve good books by maintaining accurate data. In short, record every transaction.
Even when your business is just starting, you have to keep a close eye on your transactions. The early years of your business will either create solid financial data or create a mess your accountant has to clean. If it is the latter, at the least, your financial analysis could be inaccurate and ineffective, at the worst, you could have lost money somewhere inside your messy books.
Recording every transaction is easy enough but don’t underestimate it. Being busy, business owners tend to leave the recording to the next day and continue to do so until the next day becomes the next week or the next month. If you don’t record transactions in real-time because you are busy, it will make you even busier the next time you look at your books.
You can set a schedule for when to record transactions and stick to it. By scheduling it you will also have a better time recalling them in a given period.
Take advantage of new technology that works for you
In today’s market, accounting software is replete. As the market trends evolve, it only makes sense to keep up with them. By using software, you are automating your tasks and avoiding manual and repetitive tasks. In integrating data capture tools, you will be eliminating routinary tasks like data entry and lessen the likelihood of error.
A good accountant will know which accounting software will be best for your business. It is important that your software works for you and not enslave you with countless useless features.
Some software will be able to help you organize your data so you and your CFO will be able to interpret them into meaningful applications in your business.
Good software will also assist with your tax compliance. Coupled with your tax expert, staying compliant will become easier.
Keep your documents
While we are talking about compliance, it is imperative that you not only keep your books accurate, you must also retain your documents.
While an audit is not imminent, it is better to keep a complete record to back up your reports. These documents could include receipts, invoices, bank statements, payroll records. Lucky for you, the right accounting software will have a feature to store and pull these documents.
Be on a manhunt for warning signs
Watch out for transposition errors. They are human errors or errors made by optical character recognition programs. They occur when the position of two digits is accidentally switched. Other errors from manual bookkeeping are usually common such as omissions and duplications.
You can also look for red flags in your financial reports. Some sudden and unusual change in your Cash Flow might be an omitted transaction. Your Income Statement could also reveal a few warning signs about your financial health. Keep an eye on your profit margins, it will help you determine pricing and scaling strategies.
Reevaluate your methods, double check your records
One tactic could prove effective for a certain time in your business’ life, but it will need to be changed in order to meet the progress of your business.
If you are doing your accounting manually as you often do at the start, you need to double-check your entries to ensure nothing is left out.
As you experience growth, your methods will have to evolve with you and the best way to stay on top of them is by collaborating with experts who are integrated into your industry who have an understanding of what works and what doesn’t.
If you are looking for help with your books, you can talk to us, and together, let’s foolproof your accounting.