As we jump into a new year, it may be a good time to not only examine your personal health but also your business’. In doing this, it would be a good time to do a review of current accounting processes and procedures in place for any toning needed for the new year. We have compiled a list of best practices Breakwater lives by to implement as part of your business’ New Year’s resolution.
Have a clear concise chart of accounts
Have a minimum number of chart of accounts that still allow for enough detail to make business decisions. Clean chart of accounts can also help with budgeting, forecasting, and providing tax preparer with correct information.
Reconcile bank balances monthly to third party statements
Performing reconciliations monthly is a great way to ensure the records are in agreement with third party balances. This will help in catching any errors in a timely manner.
Attaching source documentation to transaction for ease of access and accountability
A good internal control is attaching source documents directly to the accounting transaction within your accounting system. This provides for an audit trail and allows for easy access to documents if needed.
Perform a high level review of financials
Monthly review of a balance sheet and profit and loss statement in order to analyze trends and overall financial health of the company. This process may also help identify potential categorization errors if there are large variances during comparison to budgets.
Collect form W-9s from any new vendors prior to payment to aid in year end form 1099 preparation.
As a best practice, a Form W-9 should be completed prior to initial payment to the vendor in order to help in the year end Form 1099 preparation for the business. By requesting prior to payment, this incentivizes the vendor to provide the completed form to you.
Be open to leveraging cloud based accounting softwares and applications to streamline accounting processes.
Overall, this will provide for more accurate financial data in real-time also allowing for access anywhere at any time. Cloud based accounting creates efficiencies in internal processes through automation.
Keep personal income and expenses separate from the business
Will provide for more clear and accurate financial records as well as having a clean set of financials for your tax preparer.
Meet with tax preparer regularly to discuss tax planning
For tax planning purposes, meet regularly with your CPA to discuss current financial health as well as any plans for the business on the horizon in order to consider any potential tax consequences.
By implementing these practices your business’ financials will be in great shape throughout the year, leaving you time to focus on your personal resolutions.