Stop Accounting Mistakes in Their Tracks: 8 Tips

Does preparing your company’s accounting report give you the shivers? Are you afraid of making irreversible mistakes? It’s indeed better to know what accounting is to ensure impeccable cash flow as an entrepreneur. Not only must you understand your legal obligations, but you must also achieve flawless management. So, how can you keep your accounts properly without wasting endless time? If you need help organizing your books, this article is for you.

Appoint the right person to take care of your accounting

From a legal perspective, as an entrepreneur, you have every right to manage your company’s accounts yourself. However, you may prefer to focus on your core business and not get involved in the headache of accounting operations! Simply delegate this task to others. So,  who can do your accounting? 

A competent person on your team can absolutely carry out this mandatory management. You should know that you can also outsource this work by entrusting it to an accountant. 

Accounting regulations mandate working with a professionally registered individual. Only a qualified expert is authorized to do so.

• keep your account book;
• check them;
• monitor them;
• establish a recovery plan if necessary.

Finding the right accountant

This number-crunching specialist is one of your key partners. They’re expected to support you, day in and day out, in managing your company for many years to come. They must, therefore, be your best financial confidant, but also share your entrepreneurial values. So,  how do you choose your accountant? In practice, before hiring the first accountant you find online, opt for one who meets the following criteria: 

• He is competent in your field and in particular masters the specific features of your field of activity ;
• He is available and responsive;
• How it works suits you. If, for example, you prefer to dematerialize your company’s accounting, choose an online expert. The latter creates, using software, clear dashboards that you can consult, in real time, from anywhere. If you want to have regular physical contact with your accountant, without hesitation, favor geographical proximity to the accounting firm.

Check your company’s accounts without making mistakes

One of the most essential accounting tasks for any business owner is auditing their books. Don’t stress! Read on to learn how to audit your books in a nutshell. It’s simply a matter of making sure your business’s accounts are accurate. This is only possible if:

• You performed the accounting entry with the highest level of seriousness.
• You have translated all the movements made into your accounts.

 

From there, follow the next steps.

• Identify the accounting transactions that make up your account balances and ensure each item is clear. In practice, regularly review your accounts receivable and accounts payable. Look for any unpaid invoices that could justify your account balances. These are invaluable documents for monitoring your accounting entries, so make sure they are all stored correctly.
• Attach supporting documentation to each transaction. This could be an invoice, tax declarations, etc. 
• Check that all transactions carried out are correctly recorded on the correct account.
• Verify that your inventory aligns with your paper records.

If you go through a qualified professional, they will provide you with a certificate at the end of the check, stating that they have not detected any errors.

Easily create your company’s accounting balance sheet

The balance sheet reflects the image of your company’s assets at a given moment. This summary document must be updated once a year, generally before the end of the financial year. Let’s see how to prepare your balance sheet. 

It comes in the form of a table which lists 2 main elements:

• assets: it brings together all the elements of the company’s assets (building, goodwill, stock, receivables, bank balance, etc.);
• liabilities: this includes what the company owes, such as debts to a supplier, a sum of money owed to a bank, etc.

To create a balance sheet, use Excel or accounting software to make a table. List assets in the first column. List liabilities in the second column.

Balancing your balance sheet

Your balance sheet is based on the concept of financial equilibrium. Therefore, each unit of liabilities must correspond to an element of assets. Thus, to have a good balance sheet, the total assets must necessarily be equal to the total liabilities.

Is your balance sheet not adding up, even though you’ve just spent hours on it? In accounting, inattention is unforgiving! So, before you worry, check that:

• you did not make a number inversion;
• you have entered the numbers in the correct column;
• Ensure that all data is reported without omission;
• you didn’t add any numbers.

If, despite everything, your balance sheet doesn’t balance, it may be because you didn’t prepare it properly in advance. So, read on to correct your mistakes.

Check your cash flow accurately

Bank reconciliation is not mandatory, but it is essential for accurate accounts. So, what is bank reconciliation? This process helps you understand your cash flow clearly. It involves comparing your bank account’s accounting records with the transactions on your bank statement.

Concretely, you must:

• associate each line of the bank statement with an accounting movement by checking the accuracy of the amounts;
• regularize erroneous or missing entries;
• Verify that the bank balance matches the book balance.
• control your accounting entries.

You thus highlight any possible differences due to:

• input errors;
• omissions;
• unrecorded cash receipts or undebited checks.

Understanding the difference between accrual accounting and cash flow

Maintaining regular accounting records is a legal requirement for all companies. Accounting regulations have provided for two systems:

• accrual accounting;
• cash accounting.

Depending on your tax regime, you might not have an option. Accrual accounting is required if you operate:

• a sole proprietorship under the BIC unless it’s a self-employed business;

• a professional practice company;

• a commercial company subject to IRIS

In accrual accounting, you document payables and receivables along with all cash transactions. You note a customer’s invoice in your ledger once the service or product is sold. Simultaneously, you record payments in your journal.

Conversely, cash accounting captures only income and expenses. It does not document receivables and payables. This reduces the number of entries. As a result, you can save time and money on accountant fees if you have one.

Knowing the accounting documents is mandatory

By law, certain documents are required for proper accounting. So, what accounting documents can’t you do without?

Whether in paper or electronic format, you must have a journal and a ledger. 

The first records, chronologically, all the movements impacting the assets of your company. This could be purchases as well as sales, for example. The general ledger, for its part, gathers all the information from the journal and distributes it according to the chart of accounts.

Proper bookkeeping requires a minimum of rigor. While you are entitled to perform these tasks yourself, you also have the option of hiring an accountant. In any case, you are required to: 

• regularly monitor your company’s accounts;
• produce an annual accounting report;
• possess the mandatory accounting documents.