Finance and Accounting Services in the Philippines
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A company needs to be profitable in order to thrive, and whether it is a small business or a large multinational company, having a team of accountants on hand is extremely important to determine whether its revenue is more than its expenses. Furthermore, accounting is also extremely important in order to understand which areas of the business are doing well, and which ones need close attention so as to turn them profitable.
Expert accountants can analyze important data regarding expenditure, investments, etc. and determine an ideal manner for reporting revenue growth. Unfortunately, even though most big companies have a dedicated accounting wing to take care of these processes, it is the small businesses which find accounting and finance a challenge. Only 40% of the small business owners feel they are knowledgeable about accounting, and only 42% of the small businesses have a controller for accounting, which is a worrying trend.
Contrary to expectations, managing the financial end of your business is not as scary as most people would presume. By creating a realistic plan with a well-thought out budget and diligently maintaining records correctly, you can ensure that your accounting checklist gets off to a flying start.
But then again, doing so is just the tip of the iceberg, and unless you familiarize yourself with how income statements, balance sheets, and cash flow statements work together, you might soon find yourself in trouble. Our accounting checklist for businesses will help you prepare to take on a variety of accounting functions while helping you streamline your tax preparation.
Here is a small business accounting checklist consisting of the 20 most important things to keep in mind while setting up a robust accounting strategy -
For most small to medium scale businesses, cash liquidity is extremely important in order to conduct daily tasks. Checking your cash flow daily can help you keep track of your expenditure, and is, therefore, one of the most important tenets of the accounting checklist for business startups. You should always be aware of you much you are expected to pay your vendors, while checking your daily incoming cash to notice seasonal and customer specific trends if any.
Although a tedious task in itself, recording your daily expenses is one of the simplest ways in which you can keep a strong hold over your businesses' day-to-day accounting functions. Make sure that all functions such as customer billing, vendor payment, etc. are recorded carefully on a daily or weekly basis, based upon the volume of work. Although you can easily use MS Excel files or even manual ledgers, we would suggest that you opt in for accounting software such as QuickBooks.
You should always ensure that all your invoices, however unnecessary they seem, along with any other cash receipts are always documented and filed properly for posterity. Nowadays you can make good use of scanning software to digitize all your invoices too, thereby reducing clutter.
Also make sure that you start different invoice files for different categories, such as a vendor file, a payroll file, etc.
Always keep track of your accounts payable and ensure that enough funds are available and have been earmarked so you can pay your suppliers on time. This, in turn, would ensure that you always maintain favorable relationships with them, while avoiding late fees, if any. Also, whether the payment is made by check or through an online transfer, always keep a copy of the invoices.
If you want to remain on top of your finances, always make sure that you are maintaining a file for unpaid vendors, including details about amount due, billing dates, due date, etc. This would ensure that every time you have spare cash available, you can finish off some payments and close a credit line for a better relationship with your vendors.
A healthy cash flow is always important and should be right at the top of the accounting checklist for small businesses. This is because knowing how much cash you will be generating over the coming months will help you set deadlines for the payment of various bills, both to the people you employ as well as to your vendors. This would also help you in the long run by allowing you to make better-informed decisions.
More often than not, invoices are due within 30 days of being raised, which in turn will help you forecast your revenue for the month. Therefore, when raising an invoice, always include the payment terms and the due date to prevent collusion. You can download a variety of invoice templates from the internet, or prepare your own using Microsoft Excel quite easily.
Although it might not seem that important, reconciliation of all your cash business transaction entries need to be accurate so that you always know how much cash liquidity you have available on a monthly basis. This also makes it easier to correct errors or find omissions which can then be looked into and corrected.
Sometimes, due to unforeseen circumstances, you might not get paid back in time. Therefore, always maintain a ledger separately to record all past-due invoices so that you can keep a track of how much you are owed while being able to reach out to the people who owe you money much more easily. This is also helpful at the end of the year when you need to give the details to collections or write off an unpaid debt as a deduction.
One of the most overlooked areas in most businesses is the inventory which is maintained, and therefore is an extremely important point in the accounting checklist for startups. Make sure you can take some time out to check your inventory and reorder products while clearing older ones. By checking regularly, you can always make necessary adjustments so as to ensure you never have too many items in stock, or too less.
While payroll is a monthly recurring thing, tax payments are more haphazard in the manner they need to be paid. Be it federal, state, or other local taxes, it is always important to accurately report and deposit the applicable tax that you need to pay.
At the same time, you can also review the payroll before disbursement so that whatever corrections need to be made, can be made immediately. If you have a lot of employees, then you can even loan out this task to a payroll service provider.
Your income statement is always a great source of information when you want to deduct accurate profit/loss ratios while telling you exactly how much you have earned over a month or a year, while detailing the expenses. You can check historical profit loss statements to compare yearly performance while finding out problem areas in your business. Comparing it against your budget is also extremely useful, letting you find out how close you are sticking to your goals.
By comparing your monthly balance sheet to the same months from the previous year, you get better clarity of how your assets and liabilities are performing YoY. By looking out for significant trends and changes, you can better predict future outcomes, and take evasive actions, when necessary.
In the US, the IRS, as well as the most states, require payroll reports to be submitted to them on a quarterly basis, along with any other payments. Once again, make sure that your quarterly payroll reports are in order, and if too much to handle, always take help from a payroll service provider.
The IRS requires that you report the annual earnings of all your employees via from W-2, as well as for any independent contractor (form 1099). The deadline which the IRS maintains is the 1st of February, and within this date, you must mail copies of all the necessary forms. To better manage your time, you can consider e-filing services available online.
An accounting checklist would be empty without this suggestion. Filing taxes is always a hectic proposition, and carefully reviewing your company's financial reports either alone or with someone else is always a good idea. Before signing off your tax returns, review the same for accuracy unless you want to be audited by the IRS. In such cases, accounting software manifests themselves into saviors and can not only help you save time but costly errors as well.
In many cases, if your business requires the maintenance of an inventory, then some items may never be sold from it. These then need to be written off, and any write-down translates into a deduction when you file your year-end taxes. If you never write down the inventory that you have not been able to sell, then you will be overstating your inventory's current worth, and therefore paying more taxes for the same.
Most states in the USA, as well as the IRS, require business owners to pay their estimate income taxes before their due dates. By reviewing your yearly profit and loss statements, you can compute if you need to pay any income taxes, and if so, pay them off in a timely and efficient manner.
Since you are now already maintaining a receivables ledger, so you can easily track down the customer who still owe you money, and based on whether you think they will be able to pay or not, you can send the due bills to a collections agency or write them off as deductions.
Some states in the USA require some business owners to pay sales tax, and therefore you must make sure whether you fall within the rules for doing so, and if yes, then pay your sales tax on time. The US Small Business Administration (SBA) can help determine whether you need to pay sales tax or not, so if unsure, you know where to turn to.
At O2I, we have worked with some of the largest multinational companies, as well as new startups and small businesses and provided them with high-quality finance and accounting services. Our bookkeeping services are ideal for when you require a partner you can trust with your outsourced confidential information, and our cost-effective rates ensure that all your requirements are met in-house, and within a budget that suits you.
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