When it comes to accounting and bookkeeping, there isn’t much room for error. Keeping sloppy books is not only bad business, but it can also be expensive in the event of an audit. There are some missteps, though, of which even a good bookkeeper can be guilty. Here are some to keep in mind when reviewing your accounting practices:
Source documents
Paperwork, such as purchase orders, invoices, remittance details, shipping documentation, bills of lading, and proof of delivery are vital to keep filed. These items prove that the transaction occurred, that you and your vendor have agreed on terms, and they also protect you in case of a dispute. If a problem arises, you can always go back to the source documents for backup. While it might be tedious to get source documents from everyone involved, the effort is well worth it. This small step can keep things flowing smoothly.
Your chart of accounts is important
When entering information into your software, make sure you’re coding your transactions correctly. This is essential because it ties back to your tax return and how your expenses are handled. This detail will determine what you may be able to write off down the line.
Monthly reconciliation
In order to catch common mistakes, a monthly reconciliation is extremely important. This will account for unrecorded transactions and will catch errors. Do it monthly so the errors don’t snowball. This is especially vital for accurate cash flow.