Small business owners usually concentrate on expanding their client base, increasing revenue, growing their business, and delivering high-quality goods or services to retain their existing customers. Although every business must keep an eye on all these things, business owners must not allow their accounting to fall by the wayside. Accurate accounting is important for a business to thrive and survive. So, owners should consider hiring Phoenix accounting services to help them get financial tasks done. The majority of small business owners do not know a lot about accounting best practices. However, they have to learn these to guarantee the accuracy of their finances. These best practices include the following:
Determining the Accounting Method
Before a company owner can start keeping their books, they should decide how they will be kept in the first place. They can choose between cash accounting and accrual accounting. Cash accounting includes recording transactions once payments are made or received. Meanwhile, accrual accounting includes recording transactions right after they happen, even if no money has been received or given.
When a company picks an accounting method, it has to stick with it as per the rules of the IRS. But if it has to change its accounting method, it can do so once as long as they get approval from the IRS.
Tracking Business Expenses
Small businesses that are starting out can track their expenses and accounts payables with the use of a simple spreadsheet. However, as they grow, this option will not be feasible anymore. A thorough record of business expenses must be kept, which requires records of all receipts. This makes it important to use a more accurate accounting method for keeping track of a company’s growing expenses. This usually means working with a trusted CPA.
Monitoring Accounts Payable and Receivable
Accounts payable include any amounts a business owes to creditors and should be paid accurately and promptly to keep good business relations. Also, paying on time lets a business avoid late fees and benefit from discounts that might be available for paying early. Meanwhile, accounts receivables are amounts due to the business for unpaid products or services it supplies to customers. Efficient invoice management allows for quick and timely collections of debts, preventing the accumulation of past-due accounts and keeping money in the bank.
Handling all finance and accounting tasks may be daunting and time-consuming when a business owner only wants to run their business because they cannot afford to hire a full-time CPA. Thankfully, they can outsource these tasks to an established accounting firm.