Three Reasons Your Small Business Must Implement an Accounting Process in Herndon, VA

The accounting process includes financial transaction summarization, analysis, and reporting. If you own a business, you must establish this process to keep your bookkeeping department efficient. However, a lot of accounting and finance departments lack proper organization. Because of such inefficiencies, major issues can develop over time. 

Ultimately, a company’s accounting process will make things easier for you. With this process in place, financial decision-making and bookkeeping tasks become less complicated.  Here’s why you should implement a solid accounting process with the help of a reputable Accounting Firm in Herndon, VA, in your organization:

Manage Accounts Payable

Bookkeeping tasks need to be completed at a certain time every accounting cycle. Otherwise, things can easily get lost in the mix. A well-defined accounting process ensures that payables such as invoices will not get overlooked. Not paying debts can damage the reputation of your organization. You may no longer get necessary suppliers from vendors and suppliers when you do not pay what you owe them on time. Also, suppliers may lower your credit limit and decide not to offer you preferred rates. 

It is important to carefully manage complex accounts payables. You must pay attention to your reconciliations and ensure your profit and loss statements include these numbers. This makes sure you have accurate financial data. 

Manage Accounts Receivables

The structure of your small business accounting controls outgoing expenses and makes sure money flows continuously into your business. Your accounting process must include when to bill your clients, how invoices must be sent, and who should follow up on unpaid receivables. 

Your accounts receivables must be managed properly to avoid serious cash flow issues. You must hold every client accountable for paying their dues on time. Otherwise, they will get used to paying late or missing payments altogether. 

Analyze Business Finance

Establishing an efficient bookkeeping process in your business lets you get an accurate picture of your company’s financial health. Entries are closed every month, quarter, or year, depending on the way it’s set up, ending the accounting cycle. During this time, the bookkeeper will make an income statement and a cash flow statement, as well as update your balance sheet. These reports are important, so you know the financial performance of your business. Through financial analysis, you can compare current numbers to numbers in the previous accounting period. 

Your small business must establish bookkeeping KPIs, which are measured against your balance sheet.  However, your balance sheet must be updated, so you know how your business is doing.