The solution that simplifies your expense accounting

For every business, whether it be a single entrepreneur or the world’s largest multinational, keeping meticulous accounting procedures is essential. But for many businesses, especially small- and medium-sized companies without a dedicated in-house accounting department, the prospect of introducing and maintaining proper accounting procedures can seem overwhelming.

The accounting cycle is the period of time over which you track of all your business-related financial transactions from the opening balance through to closing the accounts. It is a methodical process which begins when a transaction, such as a purchase, occurs, and ends when it is recorded in the company’s financial statements. It generally coincides with the company’s fiscal year.

In the simplest of terms, it involves tracking the money coming into your company and money going out of your company over this period. For both business and legal reasons, it is important to monitor transactions over the accounting cycle to ensure your company is financially sound and prepared for whatever may lie ahead.

Not only can the right information about the accounting cycle tell you whether your business is ready to finance new opportunities or whether it is time to tighten your belt and weather the storm, it also lets your clients, shareholders, investors and creditors understand your financial health and ensures you are complying with all relevant reporting obligations.

A chart of accounts (COA) is one tool that helps a business track all its financial transactions in one place over a specified accounting period. It provides a complete list of all the business’s accounts, divided into sub-categories such as cash, savings, assets, vehicles, property, insurance, etc.

One of the biggest mistakes any business can make is to think it can turn its attention to its accounting procedures on an occasional basis, and sometimes only at the end of the financial year. Nothing could be further from the truth! By introducing simple accounting procedures to be implemented throughout the business on a daily basis, you can avoid the end-of-year stress and plan for the year ahead with confidence.

Regardless of the size of your business, there are a few basic accounting concepts that it is essential to understand if you want to ensure it operates smoothly. Keeping an accurate journal of every transaction is a key component of this process.

In business terms, a journal is a detailed record of a company’s financial transactions. It is essential a logbook which is used to compile the accounts at the end of the fiscal year, when the information is transferred to the company’s official accounting records. In simplified terms, a journal entry records the date of the transaction, the account to which it relates, and the amounts involved.

The fiscal year, or tax year, is a twelve-month period of time that companies and governments use for financial reporting. Although the fiscal year may coincide with the calendar year, in other words, it may begin on 1 January and end on 31 December, it need not necessarily be the case. For example, schools and universities often use a financial year which corresponds to the school year, beginning in September, while other companies may choose different start dates depending on their own financial cycles. 

A balance sheet is a document which reports information on a company’s financial situation, it’s assets and liabilities at a specified time. This is the most basic accounting document which provides the owner, investors, shareholders, regulators and clients with a snapshot of the financial health of the company. Used alongside other key financial documents, the balance sheet is key to undertaking a thorough financial analysis.

The rules which a company follows when recording and reporting its income and expenditure is known as the “accounting method”. There are two main accounting methods: cash accounting and accrual accounting.

Cash accounting involves recording revenue and expenditure as and when they are received and paid, while accrual accounting records revenue and expenditure when they occur. Governments may require business of a certain size or in a certain sector to report their financial transactions according to a specific accounting method.

The term “financial statement analysis” refers to the practice of analysing a business’s financial statements in order to make decisions about its future. Within a company, this analysis is used to identify potential strengths and weaknesses, and to inform decision-makers about potential threats and opportunities. For external stakeholders such as clients and investors, financial statement analysis helps them get a clear picture of the financial health of the company.

Accounting software is an invaluable tool for modern businesses of any size. It is essentially a computer programme which helps record and track a company’s financial transactions and meet its accounting obligations. The types of functions that a piece of accounting software can provide vary widely. In general, the aim is to make it easier for businesses to understand and analyse their financial records. It can save huge amounts of time and resources and when used correctly can provide accurate information for internal and external audits.