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3 Bookkeeping Leading Practices

Whether you get your bookkeeping done with a professional—as you get with us at KPMG Spark—or you do it all on your own, there are important things you can do to make it easier for you and your bookkeeper. Here, we will outline three leading practices for bookkeeping we recommend to our clients.

Regardless of the size of your business or the industry your business is in, there are a few leading practices we recommend to our clients in order to be successful. Additionally, having your records organized will lead to more accurate representations of your company and will help you make better financial decisions. Whether you get your bookkeeping done with a professional—as you get with us at KPMG Spark—or you do it all on your own, there are important things you can do to make it easier for you and your bookkeeper.

1 - Separate Business and Personal Finances

Separating your personal and business finances may seem obvious, but the line between business and personal finance is frequently blurred with small business owners. If your business and personal accounts are intermingled, it is a recommended leading practice to separate them by obtaining specific business checking and business credit card accounts. Our bookkeepers recommend that personal accounts should not be used for business transactions, nor should business accounts be used for personal transactions. Having business-only checking and credit card accounts helps you keep business finances and records distinct from personal, maintain accurate bookkeeping, and grow effectively. Mixing the two leads to more time and effort determining whether transactions are business or personal when it comes to bookkeeping and filing taxes.

2 - Follow Your Business Entity Type

When starting your business, you will have to elect an entity type. As more time goes on, and as your business grows and develops, it is easy to forget your entity election or to forget certain accounting and tax treatments that exist for your entity type.

The business entity type determines how an owner’s cash contributions and distributions are recorded, how taxes are paid, and whether or not owners must be employees- just to name a few. It is important to work with your bookkeeper and tax accountant to help transactions flow through your business in accordance with your business entity type. Not adhering to necessary and required accounting and tax treatment could lead to difficulties during an audit by the IRS and state taxing authorities. With real-time access to bookkeepers and tax professionals at KPMG Spark, you can feel confident your business transactions are adhering to entity type accounting and tax treatment.

3 - Frequently Review Your Bookkeeping

Frequently reviewing your books (we recommend at least once a month) is imperative in knowing the financial health and standing of your business. Being familiar with your financials allows you to make better financial decisions – whether that is ordering new supplies or inventory, hiring new employees, or cutting spending in certain areas.

If you’re not reviewing your books, you might miss a duplicate transaction and have overstated expenses. Relying on inaccurate information could cause you to spend money you don’t have, which could lead to incurring debt that could be avoided if you regularly check on your bookkeeping. Frequently reviewing your books allows you to budget more effectively, identify where money is being overspent, identify irregularities or disparities, identify new growth opportunities, and have easier access to capital.

At KPMG Spark, you can trust your dedicated bookkeeper to work with you and handle your financial records. Your bookkeeping team is always just a call, email, or text away from keeping you up to date on your finances. Give us a call at 1-855-777-7696 or visit our website to schedule a consultation today!

 

 The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG LLP.

This blog article is not intended to address or provide advice concerning the specific circumstances of any particular individual or entity and does not constitute an endorsement of any entity or its products or services.

Some or all of the services described herein may not be permissible for KPMG audit clients and their affiliates or related entities.

The following information is not intended to be “written advice concerning one or more Federal tax matters” subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230. The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.

Ben AsplundDecember 15, 2020Posted In: Business Tips

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