Published on November 3rd, 2014 | by admin
Accountancy Basics For Small Businesses
Keeping a close eye on the financial performance of a business is not just prudent but is also legally required by incorporated companies under the Companies Acts who must keep financial records for at least six years.
So what financial records are we actually referring to? It is imperative to have a sales ledger, a cash book to record money as it goes in and out of a business entity, a wages book as well as a purchase ledger to monitor all outgoings.
The paper chain is essential! So keeping hold of the relevant documentation including copies of receipts, employment contracts and other paperwork relating to financial matters is vital to be able to accurately manage such financial records.
When it comes to keeping accurate financial records in business books and forms, an essential piece of paperwork which SME’s need to compile is a profit and loss account.
As a simple and effective barometer of performance, profit and loss accounts are very important for any business owner giving an overview of the income and expenditure streams.
A suggested, simple format for documenting profit and loss accounts should show income at the top with expenses and costs underneath. It’s also a good idea to arrange costs in groups rather than listing every single item. For example print, postal supplies and stationery costs should be grouped into one handy heading.
Depreciation is an important consideration too which is the cost of any large items bought such as office equipment or vehicles. This must also be factored into the accounts documented.
It is prudent to compile such information quarterly in order to monitor and measure financial progress. This also allows changes to be made to a business wherever necessary to facilitate an improvement.
Furthermore, such sensitive and confidential information must be stored securely to guard against ID fraud.