Business success depends, in part, on how well a business’s finances are organized. Bookkeeping helps keep things organized, which generally makes everything easier. You can easily access the relevant financial information. The probability of making mistakes is also lower if your bookkeeping practices keep your financial information organized. Since your data is reliable, you’re also more likely to make good business decisions, as well as make them quickly.
Developing a habit of practicing good bookkeeping can be difficult, which is why outsourcing to accounting and bookkeeping services is a frugal and whip-smart recourse. Nevertheless, knowing about these practices can’t hurt. Here are some of the best bookkeeping practices.
Separating Personal and Business Finances
Bookkeeping for one entity is difficult. Bookkeeping for two entities is even more difficult. Bookkeeping for two entities that use the same bank account is an accountant’s nightmare. If you don’t separate your personal and business finances, you’ll be living this nightmare. Fortunately, this isn’t common, but it can be tempting for small business owners.
Since you’re using the same account, it’s hard to keep track of your expenses and incomes. Moreover, it’s also difficult to identify how much spending money you have for yourself and your business. This can lead to some extremely costly decisions, such as spending on personal expenses and not having enough money left to reinvest in growth. Keep separate bank accounts to streamline and facilitate the bookkeeping process.
Accurate Records
One of the main purposes of bookkeeping is keeping accurate financial information. Consequently, this is a no-brainer. However, correct records do more than keep your finances neat. Investors use these records to evaluate whether they should invest in your business. Moreover, these records are used to file taxes and make other decisions. Accurate records can generate positive ripple effects throughout your entire business.
Internal Controls
Internal controls and rules are crucial to prevent fraud and other financial mishaps that can harm your business. One of the most important internal controls is a separation of accounting powers. Generally speaking, there are three accounting functions: authorization, record keeping, and asset custody.
Authorization is the power to clear transactions involving an entity. Record keeping is the responsibility to ensure all transactions are noted down and recorded. Asset custody is the power of possessing and being responsible for an asset. If these duties aren’t separated, the risk of fraud increases. For example, if a person is tasked with all three functions, they can easily steal money without recording it on a company’s books.
These are some of the most important bookkeeping conventions, but this list is far from complete. Fortunately, you don’t need to put in the hours to apply and become proficient with these practices. Outsource your accounting and bookkeeping operations to us at 3Alpha, LLC, and we’ll ensure your finances are properly managed and secured. Other than bookkeeping data entry services, we also offer timely tax preparations, architectural visualization services, and more. Get in touch to learn more.