Let’s talk about reconciling your account(s) on a regular basis and why it’s necessary for not only your bookkeeping but your business. First, what does it mean to reconcile your account? This means you compare your books to your bank accounts over a period of time to make sure everything aligns perfectly (example: comparing your records to your bank account from March 1 - 31, 2019). If there are any discrepancies, you can catch them and act on it. Also, note that you only need to reconcile your accounts if you use the accrual method of accounting. If you use cash basis accounting, then every transaction is recorded at the same time as the bank, so there are no discrepancies.
There are four big reasons you need to reconcile your account(s) on a regular basis.
Does your business use cash basis accounting or accrual accounting? What makes the two methods different is the timing of when sales and/or purchases are recorded in your accounts. Cash basis only recognizes income and expenses when money has been actually been exchanged. Accrual recognizes income and expenses as they’re earned/billed, whether they’ve been paid or not.
We always say you should be paying constant attention to your books, so we decided to break it down based on what you should be doing daily, weekly, and monthly. What you do in these short periods of time can impact the overall state of your books and your knowledge of your company’s financial standing. The more often you work in your books, the less time you’ll have to spend on them come the year’s end. You’ll thank yourself come December! If not, we’re here to help.
Business owners far and wide know there is one thing you try not to do: get the IRS involved. The best (and only) way to make this happen is to be careful and make sure you are doing everything correctly. We’ve compiled some activities that could be red flags to the IRS and could result in an audit. The best way to avoid an audit is to run your business in an honest and healthy manner.
Something as simple as consistently filing your taxes late can be a red flag and attract the IRS’s attention. This is easy to avoid. Making what seems to be an unreasonably high salary can draw attention to your business, as well. Whether the employee is also a shareholder of the company or if they are given a raise dramatically, it could very well result in an audit. To avoid this, before giving an employee a raise, check to see what the average is for that position in your industry.
Adding credit card transactions to a main account that has sub accounts using multiple cards can be quite a process, but if you follow these five simple steps, you’ll be able to complete these entries without getting a headache or creating a mess of your books.
When it comes to your books, accuracy is vital. You want to handle them properly so the information you’re using is error-free and understood. If you’re doing any of the following, you’re not helping your books or your company.
Mistakes can happen in your books, no matter who you are. It’s important to know why your mistake happened and how they can be avoided.
Accounting and bookkeeping are both essential components to every business, no matter the size. They are services necessary for businesses to grow, thrive, and survive. But, what’s the difference between them? Although accounting and bookkeeping share similar goals, they each help you during different stages of your financial cycle.