Accounting best practices FOR NON Accountants
by Darrell O. Townson
If you run a small business, or are in charge of managing the finances for your employer, you know that number crunching is one of the more tedious tasks to undertake unless you love accounting and all that it entails. For the majority of us, though, it’s just mind-numbing and tedious. Having said that and gotten it out in the open, now it’s time to look at some of the practices every business should follow — small or large. At the very least, give yourself a refresher on how you or your accounting department should best deliver the goods. Generally speaking, there are two parts to running an efficient finance and ac- counting department: Aspects to take into consideration from a high view; and those aspects focused on the nitty gritty.
Where to start
1. Start with the start — at the beginning
Putting off tasks and processes you’re not particularly in- terested in starting out, but proper accounting should be a priority right from the start. And be forewarned, think, plan and prepare early on because it will only get more complicated as you progress.
2. Be brutally honest
As mentioned, accounting isn’t everyone’s forte, so take a hard look at yourself and devote your attention where it will do you and your business the most good.
3. Choose the direction that’s best for you
There are basically two directions to consider and they aren’t mutually exclusive, either. For day-to-day operations, look for the software package that meets your needs by identifying the elements critical to your business: company size, rate of growth and place of business since accounting and tax practices can differ from province to province or country to coun- try. Then, decide whether you’re the person for the job or if you need to hire a professional.
4. The software packages
In many cases if not all, current accounting software includes both online and desktop versions and offer many of the similar functions such as payments, invoices, payroll management and taxes. Here’s where due diligence is important to finding the right product for you. (See sidebar on some software solutions)
5. Spend wisely
Software solutions with every bell and whistle won’t do you much good if you don’t have the knowledge or time to in- vest in it. So choose a solution that meets your needs and it expandable into the areas you’ve determined are important. For instance, you may never have the need for an enterprise solution, so why pay for it?
6. Is a professional the right choice?
If you’re just starting out, and accounting isn’t your thing, you’ll want to try and hire a professional as soon as your company’s finances need extra attention and you can add someone to the payroll. Alternatively, explore your business networks to see if there is an accounting firm highly regarded in your area. That may be the best choice and, for the business, they may be willing to help you pick a software package that serves you and matches what they can deliver.
7. Stay separated
The lines can blur easily between business and personal spending and income. Steer clear of mixing your finances with your business finances by setting up specific accounts and budgets.
8. Stay organized
It’s easy to fall behind on tracking and keeping records of everything, but the more organized and consistent you are throughout the year, the better positioned you’ll be when tax time comes. Get into the habit of downloading and reconciling bank account information on a monthly basis at least. And keep diligent records and receipts for business purchases.
9. Manage the process
Take time to consistently check the books and see where things stand to ensure you don’t make mistakes or have things fall through the cracks.
10. Plan for major expenses
Plan well into the future to plan for significant expenses, such as new hardware or system upgrades. Being aware of potential large expenses will help better manage company finances to account for those expenses or make it through a difficult stretch.
11. Integrate payroll, payment and invoicing
If possible, select an accounting pack- age that has the capability of integrat- ing a payroll along with payments andinvoices. If not possible, streamline pay services with outside tools or services so that your business can continue to move forward without glitches. Also, in today’s automated world, there’s no reason it should take any time to send out invoices or wait for payments.
12. Figure out a system that you can scale
Whether you’re hiring a part-time book- keeper or investing in reliable account- ing software, think ahead to where you want your business to be in five years – will the tools and processes you’re putting in place now be able to adapt and grow as your business does?
As a final note, to help in your research, Capterra has put together an extensive list of software packages available for all levels, and rates them based on popularity, affordability and user friendliness. You can visit their site here https://www. capterra.com/accounting-software/
The Process of Managing Cash Flow
No accounting program, or accountant, can help if you don’t adhere to the best practices of cash flow management. There are steps that can be taken to ensure your business prospers and grows, though. Consider implementing some or all of these steps to improve your cash flow.
1. Cash Management
- Perform a daily reconciliation or review of cash balances
- Maintain a cash worksheet to monitor cash balances
- Conduct deposits and transfers of cash on a daily basis
- Streamline your line of credit if you have one
- Discover ways to shorten cash cycles,such as matching timing of payables and invoicing, reviewing invoice billings timing and method of delivery
2. Accounts Receivable
- Measure your accounts receivable performance and identify areas for improvement
- Establish payment protocols for large orders or overseas customers, using an efficient delivery method to send invoices and ensure prompt payment
- Adhere to a thorough collections policy and documenting payment history for each client
- Cycle counts versus wall-to-wall counts
- Provide allowances for obsolescence/physical adjustments
- Analyze days in inventory to identify slow moving items
4. Fixed Assets
- Establish a capitalization threshold for items over a specific amount
- Record items individually rather than as a group
- Maintain a detailed description of assets
- Consider leasing versus buying major
- Review your asset listing to ensure assets exists and are in use
5. Accounts Payable
- Strengthen your purchasing approval process by defining thresholds
- Seek opportunities to negotiate better pricing from vendors
- Electronically store supporting information
- Ensure all invoices are properly approved prior to payment
- Reconcile large accounts weekly or daily to reduce workload at month or year end and identify issues
- Download bank transaction data directly into accounting system
- Use a month-end close checklist to eliminate errors
- Run a report of all journal entries and attach support
- Print comparative financial statements and review variances for journal entries needed