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Bookkeeping is an essential task for properly organizing, classifying, and accounting for business finances. By managing the in-flows and out-flows of all company transactions, business owners can see exactly where their money is going. In doing so, they glean the insight needed for making sound management decisions on everything from expansion to budgeting. Below you’ll find the four core elements of the bookkeeping process.
The accounts receivable account refers to all outstanding revenue that is due to your business. Proper design and management of this account is important to optimize cash flow. As deposits are made, a good bookkeeper will properly code and accurately record all incoming customer payments. However, a great bookkeeper will take a more pro-active approach configuring your system to maximize cash flow, following up with clients who are late on payments, and ensuring that all invoices are sent out as expeditiously as possible.
The accounts payable account refers to all outstanding bills owed by a business and is shown as a liability on the company’s balance sheet. Proper management of this account is vital for the smooth functioning of any business entity. Late payments can lead to a host of problematic issues such as fees, increased interest charges, less lenient supplier terms, and even damage to your overall business reputation. Setting up a notification system within your accounting software can help ensure better consistency leading to improved vendor relations.
Reconciliations refer to the process of comparing all of your internal recorded transactions with your external bank and credit card statements. A monthly review helps you to identify any anomalous or unusual transactions that might be due to fraud or accounting errors. The process also helps to weed out any duplicate entries or discrepancies so that your business finances are not negatively impacted. A good bookkeeper will also be able to identify patterns and spot inefficiencies.
Proper management of payroll is an integral part of all organizations. It not only ensures employees are properly compensated, but also serves to keep you in regulatory and legal compliance with all employment legislation. Hiring an outside professional service to operate your payroll serves to save time, minimize opportunity costs, and allows you to focus more on what you do best– growing your business. All too often, payroll is viewed as merely a processing function. However, real-time comprehensive payroll reports help to leverage your data and ultimately transform it into actionable business intelligence.