The Best Accounting Practices

Every business owner knows that there are 4 pillars that make and keep a business successful: Marketing, Innovation, Management and Accounting. As a part of the experienced accountants in Oakville I have found 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 the “5 best accounting practices”, stemming from my experience as one of the established accountants 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 orSimply Accounting. These accounting programs are:

1. Easy to use
2. Provide useful reports, such as income statements, balance sheets and trial balances
3. Generate aging reports for overdue accounts receivable, and accounts payable
4. 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
5. A powerful tool to manage inventory and cost of sales

I utilize QuickBooks Pro for my accounting firm aiming to set the standard high for accountants in Oakville.

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:

1. How many years of experience do you have as a bookkeeper?
2. Have you worked with Simply Accounting or QuickBooks before and for how long?
3. Are you familiar with generating financial reports from an accounting system?
4. 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 one your local accountants in Oakville 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 Allan

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:

1. Better manage cash-flow
2. Plan for any short-falls in cash (e.g. through bank financing)
3. Help allocate company resources
4. 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 financial goals have been achieved and if where there is room for improvement. As one of the experienced accountants in Oakville, I can safely say that reviewing budgets, should be an integral part of the budget preparation and analysis process.

4. Review financial Statements with Chartered Accountants in Oakville

The #4 best accounting practice is to review your company’s financial statements seeking the expertise of one of the Chartered Accountants in Oakville, in order to obtain a thorough and more accurate analysis.

Financial statements consist of an income statement,a balance sheet and a cash-flow statement. You should review your company’s financial statements regularly to help you understand how your company is performing financially and where is stands.

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.

Furthermore, I recommend that you pay particular attention to the following areas when reviewing your company’s financial statements:

1. Sales – have they increased or decreased, and why
2. Gross Margins – are they improving?
3. Expenses – which categories of expenses are too high and how can they be reduced?
4. Cash – Does the company have sufficient cash available to sustain its operations?
5. Accounts Receivable – are they being collected in a timely manner?
6. 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 5^th 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 one of your chartered accountants in Oakville with the goal of minimizing taxes. They can provide a holistic strategy to help you reduce the amount of money outflow in the form of taxes.

The tax plan should address the following key areas:

1. The owner’s method of compensation (e.g. dividends vs. Salary)
2. Income splitting opportunities
3. All possible tax write-offs
4. The use of holding companies
5. Car allowances
6. Tax depreciation
7. Capital gains exemption
8. Deferral of revenue

When reviewing the above areas with one of your trusted accountants in Oakville, the focus should be on how best to minimize taxes in each of those areas. You will find that these areas do offer a lot of opportunity when aiming for tax minimization.

For additional information on tax planning tips, please see tax tips by Oakville Tax Accountant

ABOUT THE AUTHOR

ALLAN MADAN

CPA, CA

Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation. Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.

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