Bookkeeping is an important part of business. Every company irrespective of the size needs to design and implement a flawless accounting system to record transactions as and when they occur. Bookkeeping refers to the most basic process of recording transactions and preparation of trial balance and various other reports thereon. It is a full time job that requires dedication and constant attendance. It is constantly overlooked but what we often forget is that it is an undistinguished part of accounting process. There are countless transactions which must be recorded on a timely basis in an accurate manner.
To run your business successfully you must design an effective bookkeeping system. Here are some techniques to do that.
Prepare chart of accounts
Bookkeeping primarily involves recording of financial transactions. Preparation of complete chart of accounts enables us to sort out useful ledgers from the non-useful ones. This not only provides a better understanding of the accounts but also avoids recording transaction in the wrong heads. With proper chart of accounts in hand chances of errors are substantially reduced.
Expenses and incomes are booked in relevant heads and there are no mess-ups even. An accountant can also provide a better understanding by grouping account heads according to their relevance. For instance, salary, wages, employer’s contribution to EPF, medical reimbursement etc. can be clubbed under the head of Employees Remuneration.
Purchase an accounting software or get one developed as per your needs. Software’s are not only easy but they also save time. In manual accounting you have to maintain a variety of books, both primary and subsidiary whereas in accounting software’s all you to do is voucher entry and the accounting software will prepare all the reports for you. You neither have to prepare trial balance nor write ledgers. Everything is done automatically once a voucher is entered.
The best way to keep accounts free of material or immaterial misstatements is to analyze the books of accounts on a regular basis. Design an internal control mechanism wherein the books are checked at regular intervals, say month-end, by different persons. For instance, by bookkeeper, accountant and a manager. Regular analysis also includes checking balances, vouching and physical verification of inventories.
Keep track of cash transactions
Another important aspect of bookkeeping is to keep a tab on cash transactions. Such transactions are susceptible to fraud and errors. Entrepreneurs must ensure that they appoint a responsible person for handling cash. The bookkeeper must thoroughly analyze the cash transactions and daily update his cash book. He must also physically verify the amount of cash present in cash box at the end of every single day.
Remit taxes on time
A bookkeeper’s task involves calculation and payment of taxes on time. It is his duty to ensure that all taxes are calculated as per the latest tax rates and that they are remitted on time to avoid any penalty and further scrutiny.
To run a business successfully, you need to have a good bookkeeping system.