Following best bookkeeping or accounting practices is essential for the longevity of your business.
What does this mean?
Accounting practices are defined as the system of procedures and controls that are used to create and record business transactions. Auditors rely upon consistent accounting practices when examining a companies financial statements.
A best practice is a method or technique that has been generally accepted as superior to any alternatives because it produces results that are superior to those achieved by other means or because it has become a standard way of doing things, For example a standard way of complying with legal or ethical requirements.
When you combine the two definitions you have BEST BOOKKEEPING/ACCOUNTING PRACTICES. As a business owner there are many things you can do to ensure you are following best practices.
The number one thing every business owner can and should be doing is familiarize themselves with their financial statements this includes your Balance Sheet, Profit & Loss and Cash Flow Statement. Learn what the numbers mean and how they affect your business.
There are many things you can do to follow best practices
- Have a business plan and a budget
- Know which accounting system you will use Cash Basis Method or Accrual Method
- Keep your business and personal expenses separated, I am going to say this one again keep your business and personal expenses separate.
- Implement internal controls
- Plan your purchases
- Reconcile your accounts regularly
- Pay your bills on time