Managing your personal finances doesn't require much work. You probably have at least one checking and savings account, a retirement account, a few accounts and maybe a few payments to keep track of. Bookkeeping for business is a whole other story, though; there are just so many details to keep in mind. If you want to succeed, you'll want to follow these bookkeeping best practices. This will be a two-part article containing the best practices to help you get the best chances of success.
10 Bookkeeping Best Practices to Achieve Success - Part One
1 - Keep Personal and Business Finances Completely Separate
It is wise to keep your personal and business finances completely separate. Use separate bank accounts and credit cards for business and personal expenses. If you use one credit card for both, you'll have trouble keeping track of purchases. You may also overlook a debt that might affect your business. If you use one bank account, you'll have to use a separate bookkeeping system for business expenses versus personal expenses. It is far too easy to get confused and mix the two.
2 - Determine Which Accounting Method to Use
You should choose your bookkeeping method based on your business and how you want to structure your bookkeeping. If you have a simple business, you might want to use cash accounting. If you want to track inventory and make accruals, you'll want to use accrual accounting. The basic rule to follow is that if you want to make tax deductions, then you'll want to go with accrual accounting.
3 - Use Accounting Software to Track Business Expenses
As you probably already know, keeping track of all the different business expenses can be a challenge. Businesses use a variety of different software to streamline the process. You can use software that is designed for bookkeeping or use a business management software to manage business expenses. If you already have a software system in place, you should consider upgrading it.
4 - Track Employee Time
Is it important to track employee time? Yes, it is. You'll want to track the time that your employees are working to ensure that they are being productive, which will lead to better productivity. If you need to track time for your own purposes, you'll want to use a time management software system.
5 - Establish Internal Controls
Internal controls are important for any business, but even more so for a small business. Without internal controls, you'll be more vulnerable to fraud. You should, at the very least, have a specific person who has the authority to make payroll or bank transactions. You should also use a dual signature policy to limit unauthorized transactions.
Are you ready to take your business to the next level? You may not know it, but there are many things that you can do to improve your business efficiency. These accounting best practices will help. You should implement them even if your business is already doing well. The sooner you do, the more success you'll achieve. Read the next article to get the other half of the best practices list to ensure success for your business!
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