Many business owners even those that have been using online bookkeeping systems for a very long time, still encounter challenges even with the help of bookkeepers and accountants. This is because many of these outsourced services are dealing with the problems through manual means. It is important to realize that knowledge and experience are not the only things needed to deal with many accounting problems. Tools are also vital in ordering to see mistakes made in the past and prevent them from happening again.
What’s good about many accounting software is that they may be used by accountants but you don’t have to be one just to be able to use it. So if you are a company CEO who has a fair amount of knowledge, it is possible for you to validate the services rendered for you and ensure that your books are updated.
Accounting software on the cloud differs but they have similarities with regards to their basic features which enable checking and correcting errors to prevent getting into conflict with your bank.
Understanding the Different Accounts and their meaning
Most people already know about the two main types of accounts which are assets and liabilities. The first one refers to what you currently have while the latter speaks about the amount of money you have in debt.
But there are also other types, equity, income, and expenses. Equity is also known as net worth is the difference between the first two types of accounts. Meanwhile, income is what you call the cash that you receive from your customers. Expenses on other hand are what you need to incur to keep operating your business.
It is crucial to know that not all account names are descriptive enough. This may cause confusion. So the tip is if you are not sure how to categorize an account, try to look back to which category can the activity be associated with.
Be Keen on Invoicing and Accounts Receivable
Your accounts receivable is where your invoices and received payments will go. The report you generate from it will help you determine who needs to pay you and how much. In instances that you see a zero balance on some customers in the list, that means you have to connect the invoices and payments in your customer’s account.
A verification process is needed for open balances to know whether they are indeed due or there’s just an error with the payment received. By double-checking your income, you are saving yourself from a lot of trouble. Just make sure that you keep a record even of your old invoices just in case you need to go back on them.
Carefully Track your Bills and Accounts Payable
Tracking bills through an accounting system is not advisable. For small businesses, paying bills once or twice a month is the ideal practice and if tracking of bills is needed, owners just have to check the accounts payable aging report to make sure there are no missed dues.
Using your accounting system to track bills is just a waste of time, effort, resources, and can be considered as unnecessary complexity. Know that, unlike giant enterprises, the cash flow management of small businesses is not enough and doesn’t give them extra interest.
