The Best Ways to Simplify and Optimize Your Small Business's Accounting System
Accounting plays an important role in running any small business as it is essential in tracking the income and expenditure of the business so that accurate financial information can be provided to the investors, management, and the government for making business decisions. Financial records of the business reflect the operation and financial position of the small business. You can compare your current data with the previous records and also track your income and expenditure by maintaining clean and up-to-the-minute records.
Financial transactions can be recorded in the books of accounts with the help of accounting, this being the main objective of accounting it can help to communicate economic information. The owners can use accounting for increasing the efficiency of the business. Accounting also aids in the process of decision-making. Small businesses cannot follow a big business accounting system as it will be ineffective for the business as it can cost a lot of money.
Below are some of the best ways which you can use to optimize your small business's accounting system:
- Keep track of all the business expense receipts- Keeping a watch on the business expenses isn't a great task. With the help of technology, we can take pictures of the paper receipts and upload them thereby automatically recording them. A small-scale business owner should not fall behind on bookkeeping. Tracking the business expenses allows you to sit back and analyze your finances. When you know the real financial position of your business you will have immense knowledge about what's working and can also help you make a more accurate decision.
- Use an enhanced invoicing system- Using an upgraded and automated invoice technology that can provide your business with the potential to process authorized invoices electronically is the need of the hour. Creating invoices and billing can turn out to be a huge and complex task as there are lots of items to be tracked like recurring revenue, usage data, etc. Companies often choose a billing system that meets their needs in the short term but as the company expands these billing solutions no longer grow with the company. An upgraded and automated billing solution can add efficiency to your accounting system. Automated accounting software will update every process right from the moment of creating the invoice to when payments are received and reconciled.
- Maintain an exclusive business account- One should make sure to maintain a dedicated bank account solely for business. Separating a business account from that personal account to track all the expenses and income would become much easier. Having a separate bank account from your account helps you determine business performance, especially if you are at a point where you are making more business transactions than personal ones. Maintaining separate accounts not only saves your time but also helps you protect your assets.
- Keep up with the current profit and loss statement- Profit and loss are two of the main outcomes of a small business. The profit and loss statement shows the profit earned or loss incurred by a business. A profit and loss statement for a small business is also called an income statement. Small businesses may experience ups and downs all the time. Some things like sales can be preplanned by the owner but several factors cannot be handled by the business owners. Maintaining a clean P&L account enables you to get an overall idea of the business's health and the present graph of the business. So, no compromise with a P & L statement.
- Ensure to collect taxes- It is the responsibility of a businessperson to collect taxes. It is uncomplicated for local businesses that collect payment at the point of sale. But it gets complicated for businesses that accept credit cards from all over the world. Now it has become much easier for small-scale businesses to collect sales tax while keeping the location of the customer in mind with the help of accounting software. In the case of a service-based company, the taxes have to be added to the invoice to collect it from the customers.
- Look for ways to enhance cash flow- Improving cash flow will help put your business to stand on stronger feet for the longer term. To speed up payments, start by consulting with your clients to make payment deadlines as early as you can. Improving cash flow is very important in every kind of business ranging from large-scale businesses to sole proprietorships as cash is the lifeblood of the business.
- Build an appropriate system for expense management- Any business must ensure that they not only track employee spending but also determine how the company will reimburse the cost incurred. Tracking of expense, the purpose of the expense, and when the expense will be reimbursed must be looked into. Software to manage the expense and repayment processes can be acquired from organizations that provide implementation and support services.
- Ensure accuracy by checking the records all over again- Your files should be organized and should be reviewed often. The more you file your records and cross-check them against each other the less likely you are to have issues arising. Issues can pop up if you just file the expenses month after month ending up handing it over to the accountant. If you spend a little extra time triple-checking the records before you hand them off can save a lot of your time in the future.
- Record all donation receipts- Donations and contributions must be recorded just like any other business expenses. The majority of donations or contributions are a one-time-payment so it will be much easier to keep a record of these. If these expenses will be handed off to the accountant within their category you will be making the accountant's job much easier. The easier their job will be, the less likely are they to oversee details.
- Implement a payroll system- Payroll is a very complicated component of business ownership. When the matter strikes payroll, you can either use payroll software or hire a payroll company to handle everything from calculating the taxes to making the correct deposits to the employee's bank accounts.
How can CDA help small businesses in the UAE?
CDA being one of the well-known auditing firms in Dubai is always ready to provide its assistance to its clientele with the help of its professionalized team. It enables its clients to maintain a robust accounting system and provides all the required advice in relation with tax compliance, internal audit, VAT return filing and other accounting services to facilitate the clients to carry on their business as smoothly as possible. A small business can approach CDA without any hesitation as it renders a customer friendly and cost-effective service which makes the small business owners more comfortable, and CDA is always known for its transparent customer relations. To know more about CDA’s services contact us soon.