Managing your personal finances is one of the primary priorities in one’s life, and a majority of people can manage this on their own. But when it comes to bookkeeping and accounting for business finances, it is entirely different. There is a lot more to consider, and with employees and customers counting on you, the stakes are much higher. The following are some of the best bookkeeping and accounting practices you can adopt for the success of your business.
1. Set internal control over finances.
Setting internal control over the business finances can reduce the risk of fraud. Your bookkeeping policies should be diversified and not solely dependent on one person. Establish dual control of processes that include purchasing or receiving payment.
In simpler words, the person who opens the mail for bills should be someone other than the one who writes the check. And the person who writes the check should not be the one to authorize it. The list of payments should be forwarded to the accountant, so the entire process is free of fraud.
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2. Determine the accounting method that suits your business needs.
There are two standard accounting methods widely practiced in business management—cash basis accounting and accrual accounting.
Cash basis accounting is one of the simplest methods and approaches for accounting and bookkeeping. Cash basis accounting records transactions at the time cash actually changes hands and is usually only recommended for companies that do business strictly in cash payments.
The accrual method uses the matching principle to record revenues and expenses in the time frame they occur, regardless of when payments are made or received. The accrual method is usually the best choice for any business which will be invoicing clients.
3. Keep your personal and business finances separate.
Keeping your personal and business finances separate is crucial to ensure clarity in the management of accounts and finances. Ensure that you and your employees are not using the business funds for personal purchases or expenses.
Have separate bank accounts and credit cards for your business expenses. This will immensely help you when you are filing for taxes and ensure you keep the records. You don’t want to face legal action because your business and personal finances were intermingled.
Related: “Why Is It Essential to Hire an Accountant When Starting a Business?”
Whether you run a startup or manage a large corporation, you can benefit significantly from the services of a professional bookkeeper in meeting your financial goals. MARIELA RUIZ, CPA, PLLC, offers financial consulting, professional accounting, bookkeeping, tax preparation services, and more in Mission, TX. Visit our website to learn more about our services or call us at (956) 997-0067 for further assistance.