Every business owner knows that there are 4 pillars that make and keep a business successful: Marketing, Innovation, Management and Accounting. As a Chartered Accountant in Oakville, I feel that many business owners overlook or pay less attention to the accounting aspect of their business, despite it being a vital success factor.
This article provides 5 best accounting practices, from the viewpoint of a Chartered Accountant in Oakville.
1. Select the Right Accounting Software Package
Selecting the right accounting software program for your business is very important, because it ensures that your company’s books are accurate, and provides financial reports that you require in making management decisions.
Therefore, the #1 best accounting practice is, “Take the time to select the right accounting software package for your business.”
For small businesses, I recommend QuickBooks Pro or Simply Accounting. These accounting programs are:
- Easy to use
- Provide useful reports, such as income statements, balance sheets and trial balances
- Generate aging reports for overdue accounts receivable, and accounts payable
- Use graphics and charts to illustrate important performance metrics, such as revenue growth, change in expenses from one period to the next, sales by employee or product line
- A powerful tool to manage inventory and cost of sales
As a Chartered Accountant in Oakville, I utilize QuickBooks Pro for my Oakville Chartered Accounting Firm.
2. Hire the right bookkeeper – best accounting practice
I’m sure you’ve heard of the saying “garbage in, garbage out.” This principle applies to accounting systems as well. If you input the wrong data into your accounting system, then the system will neither produce useful nor reliable financial information.
Therefore, the #2 best accounting practice is – Hire an experienced bookkeeper who can enter all of the accounting transactions accurately into an accounting system and can generate useful accounting reports for you.
When hiring a bookkeeper, you should ask the following questions:
- How many years of experience do you have as a bookkeeper?
- Have you worked with Simply Accounting or QuickBooks before and for how long?
- Are you familiar with generating financial reports from an accounting system?
- Do you have experience in preparing T4’s, sales tax returns and payroll?
The answers that you receive will help you assess whether the bookkeeper has the appropriate experience and skill level to service your company.
In addition, you should seek the advice of your Oakville Chartered Accountant in determining which bookkeeper would be appropriate for your company. For further information on the bookkeeping services that Chartered Accountants in Oakville can provide, please see Bookkeeping
3. Prepare budgets regularly, says Chartered Accountant Oakville
The #3 best accounting practice is to prepare budgets regularly with your Oakville Chartered Accountant
A budget is a forecast of a company’s expenditures and revenues over a time period in the future (e.g. 3 months, 6 months, 1 year, etc.).
It’s important for business owners to prepare budgets periodically in order to:
- Better manage cash-flow
- Plan for any short-falls in cash (e.g. through bank financing)
- Help allocate company resources
- Set goals for revenue and profit
In addition to preparing a budget, you as a business owner, should review your company’s actual results against the budget to see if you achieved your financial goals and where you need to make improvements. Your Chartered Accountant in Oakville, having reviewed many budgets in the past, should be part of the budget preparation and analysis process.
4. Review financial Statements with Chartered Accountant in Oakville
The #4 best accounting practice is to review your company’s financial statements with your Chartered Accountant in Oakville.
Financial statements consist of an income statement, balance sheet and cash-flow statement. You should review your company’s financial statements regularly to help you understand how your company is performing financially.
While you many have a ‘gut-feel’ on your company’s financial performance already, the actual results as shown in your company’s financial statements may surprise you.
As a Chartered Accountant in Oakville, I recommend that you pay particular attention to the following areas when reviewing your company’s financial statements:
- Sales – have they increased or decreased, and why
- Gross Margins – are they improving?
- Expenses – which categories of expenses are too high and how can they be reduced?
- Cash – Does the company have sufficient cash available to sustain its operations?
- Accounts Receivable – are they being collected in a timely manner?
- Inventory turnover – is inventory selling at a fast rate, or does the company have too much inventory on hand
For further information on financial statements, please see Business Accounting Services Oakville
5. Develop Tax Minimization Strategy, best accounting practice
The 5th Best Accounting Practice is – Develop a Tax Minimization Strategy for both you and your Business
One of the biggest (yet often overlooked) expenses of any company is taxes. As such, you should develop a tax plan with your Chartered Accountant in Oakville with the goal of minimizing taxes.
The tax plan should address the following key areas:
- The owner’s method of compensation (e.g. dividends vs. Salary)
- Income splitting opportunities
- All possible tax write-offs
- The use of holding companies
- Car allowances
- Tax depreciation
- Capital gains exemption
- Deferral of revenue
When reviewing the above areas with your Chartered Accountant Oakville, the focus should be on how best to minimize taxes in each of those areas.
For additional information on tax planning tips, please see tax tips by Oakville Tax Accountant
About the Author, Chartered Accountant Oakville
Allan Madan is a Chartered Accountant in Oakville. He enjoys working with business owners, investors, employees and corporations. To learn more about Allan, please see Chartered Accountants Oakville
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