Are my account keeping practices working?

As obvious as it may seem, good account keeping practices are the cornerstone of a healthy business. However, this if often one of the first areas to be forgotten in the rush to secure and service new business and this is the point when existing accounts are neglected and cash stops flowing in the door.

The first step to determine if your current practices are working or not is to watch out for the signs of an account keeping system not functioning at its full capacity. Some of the leading indicators of faulty accounting include:

  • Late or unpaid invoices (beyond the standard 30 day terms), which means that small firms must wait to get paid first before they can in turn pay their bills.
  • Poor record keeping, which can affect the accuracy of financial statements and prevent clear calculation of taxable income
  • Outdated or inefficient accounting software - the same software you used as a brand new startup may not fulfil your needs five years down the track. You should factor in business growth, employee size and increased customer base into any software upgrading project.
  • Overworking your accounts payable/receivable employees - if your current team can't cope with their current workload, a review may need to be undertaken to determine if more employees need to be hired or if their current processes aren't working.

The above points may signal that a change or upgrade in your account keeping practices is necessary in order to maintain healthy cash flow. Late or unpaid invoices, in particular, are a key sign that you may need to conduct research into your potential or current customers or suppliers, so that you can better make decisions on whether to do business with them or not.

To evaluate the trade payment behaviours of current or potential trading partners click here >>

For more information, see also:

Accounting issues to avoid
Six accounting rules to break

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