For most startups and SMBs, handling their company’s accounting is a nightmare. The stacks of documents and numerous accounting processes become intimidating and confusing for many business owners, which is why they rather hire an accountant. To budding startups, however, hiring an inhouse resource is a cost that they may not yet be able to shoulder and is typically best to outsource this to experienced professionals.
A business’ accounting is, needless to say, highly important. It provides all the necessary information for business owners to make decisions for the company’s future and holds the statistics that investors require to give funding.
As intense as that sounds, being on top of your business’ accounting is all a matter of patience and routine. By starting and doing these three easy practices from the onset, you’ll certainly save yourself on all the stress and grief later on:
1. File and organize all documentation regularly
As one of the first practices that you should have been handling since the start, filing, and organizing all your business’ supporting documentation is a must. Developing a proper record-keeping system is a good start, and will help in avoiding a headache later on. This way, you can also effectively track your money flow and analyze it to improve on any logistical bumps that occur along the way.
Saving all the hard copies of receipts, invoices, and contracts, and backing them up digitally is another good process to go about it. This way, going back and fetching data when prompted by investors or during audits will then be easier on your end.
2. Set internal control policies
Internal control policies are not only made for use by big companies—startups, and small businesses can also benefit from having them. It can be as simple as assigning a designated person for a particular task or account, or even by setting up passwords to confidential files and company resources. By setting up internal controls, you can ensure that your business is safe from fraud and theft, and ensure that errors can be prevented and caught right away.
3. Adopt an accrual basis method of accounting
An accrual basis of accounting entails that your business logs all your accounting transactions for revenue when it’s earned and for expenses when it’s incurred. While many small businesses may prefer the use of cash basis accounting, it’s actually not acceptable under the Generally Accepted Accounting Principles (GAAP).
Through the accrual basis method, budgets or allowances for certain expenditures are set in advance, allowing for the easy viewing of expenditures through a specific period.
This will then make it easier for companies to review the data and analyze for Key Performance Indicators (KPIs), as well as make it more efficient in setting budgets and providing forecasts.
In doing these three simple practices as mentioned above, you will have an easier time handling your company’s accounting. Making this a routine from the beginning will then help your company later on when reviewing records and expenses. Beyond this, it helps develop a modicum of accounting practice, giving way for you to develop more complex accounting processes as your business grows.
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