Manage your business accounts well

Accounting is one of the most important parts of any business, regardless of its size or industry. It allows you to follow the company finances, to manage the inflows and outflows of money, produce financial statements and make informed decisions about the future of the company. Well-managed accounting can provide solid foundation for growth and success long term of a business.

However, accounting can also be confusing and frustrating for many entrepreneurs. If you don't have an accounting background, it may seem overwhelming and difficult to manage. Fortunately, by following a few simple steps, you can set up strong and efficient accounting for your business.

In this article, we'll review the steps you need to take to properly manage your business's accounting, as well as the benefits of well-managed accounting. Whether you are a beginner or experienced entrepreneur, this guide will help you know the steps to properly keep business accounts. But before that, what is accounting? What are the advantages ? Let's go !!

What is accounting?

Accountability in a company consists of recording all the financial transactions carried out by it. This includes maintaining accounting records, managing invoices, checking bank statements, preparing tax returns and other tasks related to the financial management of the business. For example, When a business purchases office supplies, it must record this transaction in its books of account by debiting the office supplies account and crediting the cash or vendor account, depending on the method of payment used.

Similarly, when a business sells a product or service, it must record that sale by debiting the cash account or customer account and crediting the corresponding sales account. Accounting is therefore a essential function of any business, because it helps you track business expenses, revenues, and profits, meet tax and regulatory obligations, and make informed financial decisions.

The different forms of accounting

There are several forms of accounting that businesses can use to manage their financial activity. Here are the main forms of accounting:

1. General Accounting

General accounting is the fundamental basis of a company's accounting system. It methodically records all financial transactions according to the double-entry principle, where each transaction affects at least two different accounts. This discipline follows a strict regulatory framework, in particular the General Accounting Plan in France or IFRS standards at the international level. It produces three essential documents: the balance sheet, which presents the company's assets at a given time; the income statement, which summarizes the income and expenses of the financial year; and the appendix, which provides additional information to understand the financial statements.

General accounting obeys fundamental principles such as prudence, consistency of methods, continuity of operations, and sincerity of accounts. It serves as a basis for the preparation of tax returns and allows stakeholders (investors, bankers, suppliers) to assess the financial health of the company. The entries are recorded chronologically in the journal, then reported in the general ledger, before being summarized in the balance sheet. This form of accounting requires great rigor and precise documentation of each transaction.

2. Analytical Accounting

Cost accounting is distinguished by its orientation towards the internal analysis of costs and performance. Unlike general accounting, it is not subject to strict normative rules and can be adapted to the specific needs of each organization. It breaks down costs by nature to reallocate them according to different axes of analysis: by product, by service, by project, or by responsibility center. This approach makes it possible to calculate precise cost prices, to evaluate the profitability of different activities and to make informed strategic decisions.

It uses various costing methods such as full costing, variable costing, or ABC (Activity Based Costing). Cost accounting also helps in preparing quotes, setting sales prices, optimizing production processes, and measuring the efficiency of different departments. It provides crucial performance indicators for managing the company and helps identify sources of profit or loss. This form of accounting requires detailed data collection and a thorough understanding of the company's operational processes.

3. Budgetary Accounting

Budgetary accounting represents the forecasting aspect of financial management. It begins with the establishment of detailed budgets for each function of the company: sales, production, supplies, investments, cash flow, etc. These budgets are developed according to a structured approach, generally starting from sales forecasts to deduce other needs. Once the budgets are established, this accounting ensures regular monitoring by comparing achievements to forecasts and analyzing deviations. It thus makes it possible to exercise control over activities and take corrective measures if necessary.

Budget accounting plays a crucial role in strategic and operational planning, facilitating coordination between different departments and the optimal allocation of resources. It uses tools such as dashboards, variance analysis reports and rolling forecasts. This form of accounting requires strong involvement of operational managers and effective communication between departments to adjust objectives and means according to the changes observed.

4. Cash Accounting

Cash accounting focuses exclusively on the cash flows of the company. It ensures the daily monitoring of cash receipts and disbursements, establishes short- and medium-term cash flow forecasts, and manages banking relationships. This form of accounting is crucial to ensure the solvency of the company and optimize liquidity management. It involves the constant monitoring of the bank balance, the negotiation of banking conditions, and the management of cash investments or short-term financing.

Cash accounting uses specific tools such as the cash flow plan, which details the forecast inflows and outflows of funds, and the cash budget, which plans financing needs. It plays a key role in managing working capital requirements and optimizing cash flow. This accounting requires great responsiveness and excellent mastery of financial instruments and banking relationships.

5. Social Accounting

Social accounting manages all financial aspects related to personnel. It processes salaries, social security contributions, paid leave, allowances, expense reports, and all elements of remuneration. This form of accounting produces pay slips, establishes mandatory social declarations (DSN, URSSAF, pension funds), and manages relations with social organizations. It must constantly adapt to changes in social legislation and collective agreements.

Social accounting plays a crucial role in controlling personnel costs and in complying with legal obligations in social matters. It provides essential information for the social balance sheet and negotiations with social partners. This accounting requires constant regulatory monitoring and great precision in data processing, because errors can have significant consequences for both the company and employees.

The advantages of bookkeeping

Bookkeeping may seem tedious, but it actually offers many benefits. First of all, accounting gives you a clear view of your finances. It's like having a road map of your money. You see where it comes from, where it's going, and how much you have left. It helps you make better financial decisions, whether for your business or your personal budget.

A big advantage is that it helps to respect the law. If you have a business, keeping accounts is not a choice, it is a legal obligation. This saves you from problems with taxes and other authorities. Even for individuals, good accounting makes filing taxes easier.

Accounting also helps you spot problems before they become too big. If you spend too much in one area, or if part of your business is not profitable enough, you will quickly see it in your accounts. It's like an early warning system for your finances. For businesses, good accounting is crucial to obtaining loans or attracting investors. Banks and investors want to see clear, hard numbers before trusting you with their money. It's like showing your report card to prove that you're a good student.

Accounting also helps in planning for the future. By looking at your past numbers, you can make more accurate predictions for the future. This is useful for setting realistic goals and making long-term plans. Another advantage is that it helps you to save money. By clearly seeing where your money is going, you can spot unnecessary spending and save money. It's like sorting through your closet: you realize that you have things that you don't really need.

Finally, good accounting gives you peace of mind. You know exactly where you stand financially, without having to guess or worry. It's reassuring to know that you have your finances under control.

How to keep accounts properly

Accounting management can be complicated and tedious, especially if you are new to it. Here are the key steps to follow to properly manage your business accounting.

⚡️Identify accounting obligations

The first step to properly managing your business accounting is to identify the legal accounting obligations. This may vary between countries and jurisdictions, but in general there are standards and rules to follow regarding the accounting documents to be produced, submission deadlines, retention methods, etc. It is important to stay informed of the rules in force to avoid errors and possible penalties.

⚡️ Choose a suitable accounting system

The choice of accounting system will depend on several factors, such as the size of the company, the complexity of operations, the number of transactions, etc. There are several types of accounting systems, from the simplest (single entry bookkeeping) to the most complex (double-entry bookkeeping). It is recommended to choose a system that suits your needs and allows for efficient accounting management.

⚡️ Maintain rigorous accounting

Once you have chosen your accounting system, it is important to maintain careful accounting by recording all of the company's financial transactions. This includes invoices, receipts, payments, bank statements, etc. It is recommended to update accounts at least once a month to avoid delays and errors.

⚡️ Hire a professional

If you are not comfortable with accounting management, it is advisable to call on a professional (accountant, accountant, etc.). They can help you keep your accounts up to date, prepare financial statements, complete tax returns and advise you on accounting and tax matters. Hiring a professional can help you save time and minimize the risk of errors.

⚡️Use accounting management tools

There are many accounting management tools available today that can help you automate certain tasks, simplify accounting management and reduce the risk of errors. Accounting software, invoice management apps, and online financial management platforms are examples of tools that can be used to make accounting management easier.

FAQ 

✔️ Why is it important to manage your business accounting well?

Accounting is a key part of running a business because it helps track the company's finances and ensure its stability. Good accounting management allows you to make informed decisions, control costs and revenues, forecast future expenses and ensure that the business is profitable.

✔️ What are the essential steps to properly manage your business accounting?

The essential steps to properly manage your business accounts are:

• Maintain regular and up-to-date accounts
• Follow the banking operations of the company
• Perform regular analysis of the company's financial results
• Comply with legal obligations in terms of accounting (tax declarations, etc.)
• Use financial management and accounting tools adapted to their needs

✔️What financial management and accounting tools are available for businesses?

There are several financial management and accounting tools available for businesses such as accounting software, online accounting services, online invoicing services, expense management services, etc.

✔️How to choose the right financial management and accounting tool for your business?

To choose the right financial management and accounting tool for your company, it is important to take into account the specific needs of the company, the available budget, the complexity of the accounting and the functionalities offered by the tool.

✔️What are the most common mistakes to avoid when managing a company's accounting? The most common mistakes to avoid when managing a company's accounting are:

• Not keeping regular and up-to-date accounts
• Failure to comply with legal accounting obligations
• Mix personal and professional finances
• Not tracking company banking
• Not doing regular analysis of the company's financial results

✔️ Is it possible to delegate accounting management to a third party?

Yes, it is possible to delegate the management of accounting to a third party, such as an accountant or an accounting services company. This can be a good option for companies that don't have the expertise or the time to handle their own accounting.

Conclusion

In short, accounting management is an unavoidable task for any company wishing to ensure its sustainability and growth. The different steps that we have listed in this article are practical guides to help you manage your accounting well. It is important to keep in mind that keeping well-organized and accurate accounting will not only allow you to meet your tax obligations, but also to better understand the financial health of your business and make informed decisions for its future.

Ultimately, managing your accounting is an essential investment for your business. By following the key steps we've outlined, you can be sure to put in place a strong and efficient bookkeeping that will allow you to thrive for years to come.