How can Good Accounting Practices be Healthy for your Business

  • May 8, 2015
  • admin@ohi

The word start-up is a trending word today! Almost every capable and aspiring entrepreneur wants to get a shot at them. What’s even better is that the stories of start-up success stories are ample which gives all of us more hope. But, on the flip side, the story is a little different! Start-ups do succeed but is there any statistic for the number of them that fail? Not really! Sixty percent of the start-ups that make an entry into the market everyday don’t even survive for a period of three years. Leave aside the prospect of being a success story in magazines. So now the question arises that what is the thing that makes some start-ups survive and lets others perish? The answer is pretty simple – the policies and operational practices like accounting! What no one reports in the magazine articles is that there is a lot of work that goes into establishing a standard set of practices for an organization. Here’s a note on how small business accounting practices can help boost profits.

Invoicing and receivable management – getting paid for the service one provides is always the rosy part of the story, keeping track of these payments and dues is the flip side. Whenever a business issues an invoice, the list of receivables increases by one and the status of the receivable is marked as outstanding! This means that the customer is yet to pay. Once, the payment is made, the associated receivable needs to be marked as paid. Sounds easy, but supposedly its equally tedious a job! The result is that during tax season, a small business has nonsensical receivable records and a lot of revenue sitting in the accounts. The results are higher taxes that the business is actually not supposed to pay! Automating the invoice management process with online payment gateways and cloud accounting software helps tackle this issue perfectly.

Effectively tracking cash expenditures – Automation can easily take care of everything except that which is not digital! And, for small businesses, a lot of the transactions are actually made in cash making it difficult to track. This is important because the cash transactions need to be considered while determining the actual profits. Ensure that every transaction – online or not- is marked and recorded. Proper updating of any accounting system is thus extremely important.

Offsetting the tediousness of the accounting processes – For small businesses this is a challenge. There is too much work and too less time in a day to pay accounting practices their due attention! And, trying to update all reports the night before taxes need to be filed does not really work out. Automating the process is a good solution but may come at a significant expense. However, there are several rudimentary but good bookkeeping software that can be made use of easily. The other way is to devote a little time everyday to accounting. Both work great!

When finances are limited for a small business, paying attention to the accounts right from the beginning is always a great idea!