Tag Archives: Accounting

Good bookkeeping is a major criterion that reflects the excellent management of a company. However, for SMEs, this exercise is not always easy to achieve. What is then the bookkeeping? What are the advantages? And what are the alternatives available to SMEs regarding this exercise?

Bookkeeping: What is it?

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Bookkeeping is the process of keeping track of all the elements that are relevant to the accounting field. It can be purchase invoices, sales invoices, receipts, or any other documents of the kind. Bookkeeping is essential, often trivialized by some business owners who consider it to bring very little added value to the company.

Bookkeeping is an exercise that can be entrusted to a company’s staff. It allows for cleaning up the company’s finances insofar as it is used to justify all the company’s expenses in the smallest details. On the other hand, it allows the company to be in good standing with the tax authorities.

However, for more efficiency and in order to obtain fully transparent points, it is recommended to entrust this task to an external provider. This service provider can be an accredited firm in the field, added to the fact that it must advocate loyalty, rigor, and integrity in all its operations.

To this end, accounting firms are an excellent option for the rigorous maintenance of the books of account, the establishment of annual accounts, and the management of issues related to tax returns and estate accounting.

Bookkeeping: A legal obligation

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If many business owners tend to trivialize the issues related to business accounting, it should be noted that it is a mandatory exercise. Moreover, the famous pretext that tends to justify the fact that an SME can do without this exercise does not hold. It should be kept in mind that the accounting obligations of companies vary according to the tax system.

However, the tax authorities require all companies to keep a written record of all transactions. These records will allow the tax authorities to attest to the transparency and accuracy of the company’s tax returns.

Bookkeeping: The advantages

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It is important for business owners to consider bookkeeping as an opportunity, not a constraint. First of all, it is important to know that good bookkeeping allows a better allocation of the company’s resources.

Indeed, the books of account contain all the information related to the chain of expenses. Consulting them allows you to quickly identify the most profitable activities and those that should be abandoned. Then, good accountancy management allows reassuring the partners and the investors in the sense that it removes the doubts relative to possible misappropriations.

It should not be forgotten that in the world of finance, the rigorous management of the finances of a company constitutes a major criterion likely to influence its listing on the stock exchange.

Bookkeeping: Accounting outsourcing as a solution for SMEs

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It is difficult for SMEs to cope with the various costs of external service providers recruited for bookkeeping in the long term. Therefore, in order to reduce expenses while complying with the requirements of the tax authorities, it is in the best interest of SMEs to resort to accounting outsourcing.

This option, which costs very little, also allows the company to eliminate certain administrative formalities. Better still, it must be emphasized that this approach has been growing considerably in recent years, to the point where software specially adapted for the exercise has been developed.

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Accounting is a fundamental part of businesses. Even though accounting mistakes can happen occasionally, but wouldn’t it be better if you could avoid some common mistakes? Here’s a list of some accounting mistakes that you can avoid with proper planning and preparation.

#1. Lack of Organization

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Do I really need to mention how accounting requires excellent organization skills?

As an accountant, you will have to record every single transaction, store (or now digitize) receipts for future use, calculate taxes and so on. However, if these pieces of information are not stored properly, it is obvious then that you might miss a crucial transaction or lose an important receipt. And, what happens when the tax season comes? You could get in deep trouble, obviously!

#2.Not Following Bookkeeping Procedures

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Nowadays, it is recommended that even small enterprises, self-employed persons and freelancers should make use of formal, detailed and documented methods to manage accounting procedures and also to perform other routine tasks.

One effective procedure is to set up standardized forms and checklists to complete so as to ensure consistency and accuracy.

Let me give you a simple example: You can put up a process for setting up new vendors and for that you will need the vendor’s name, address, telephone number and Employee Identification Number (EIN) and other crucial documents such as insurance certificates, letters of recommendation and signed contracts might be required. And, after entering these pieces of information into your accounting system, payments can be processed.

Remember that it will cost you a significant amount of time to develop such a standardized form or checklist as you will have to gather information from your vendors and then have a sort of written policy for your employees to follow.

#3. Failing To Be Accounting Software Shrewd

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Did you know that in the rush of setting up a business, many business owners do not get enough time to correctly learn the accounting software that they have chosen to use?

And, of course, when you don’t know what an accounting software is capable of doing, it is evident that you would make some mistakes or miss out on some vital functionality. Additionally, some incomplete or wrong information can lead to bad business choices.

#4. Mixing Professional and Personal Finances

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By mixing your business and personal finances, you are making one of the most common accounting mistakes that most business owners make. Therefore, it is essential to keep them separate and to keep a detailed track record of what really happened in your business and what is specifically related to your personal use only.

#5. Throwing Away Receipts

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Receipts still count today and even though they have become digitalized, there are some specific cases where they need to be recollected as they can provide solutions to mistakes or fill the gaps in bookkeeping records. Besides, during tax time, receipts can provide additional deduction opportunities.

#6. Making Maths Mistakes

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I often wonder who are those weird people who love mathematics (apart from mathematicians, of course).

Let me tell you that despite using automated accounting solutions, many people often tend to make maths mistakes (especially when they are in haste to get the job done after a long tiring day). But, remember that these mistakes (even if they arose from typos) can prove to be very costly.

#7. Failing To Reconcile Accounts

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Reconciling is a critical process that involves checking an account balance as recorded on your books is correct and accurate and ensuring that it matches the actual bank account balance. And, if there is a gap between the two accounts, this means that there is an error and if you want to prevent this small issue from worsening, you need to give immediate attention to this problem. Moreover, if you review and reconcile your business bank accounts on a regular basis, it will help you to catch any fraudulent transactions that may have occurred within the organization.

#8. Not Backing up Data

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How would you feel if the device on which you stored all your business’s financial information was hacked or stolen? And, worse: what if you didn’t have it backed up at all?

Well, this issue often happens with many accountants who feel as if their lives have been turned upside down. However, good news is that there are some pretty good backup options available nowadays that can save you from this crisis.

Will you follow these tips? Please share your comments!

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