Small Business Accounting Is A Critical Part Of Your Business ...

Accounting is a vital business function regardless of the size and nature of the company. With accounting books and records properly taken care of, a company would be in a position to see how much profit it earned in the past as well as the current financial health of the enterprise. The accounting records have to be accurate and they should not be based upon assumptions or motivated by bias. Here is a brief look at essential small business accounting methods.

The accounts receivable of a business is the account of all the money that?s presently owed to the business by its debtors. There are many customers who do not make immediate payments for their purchases and promise to pay the amount due at a specific future date. These types of customers are known as debtors. At the time of purchase, the seller prints an invoice and gives the customer a statement showing the total sum owed by the purchaser. The seller needs to keep an eye on the total amount owed and also the time allowed for payment. In the event the purchaser goes past the agreed period of time, then the seller will have to initiate some kind of action.

Accounts payable is actually the opposite of accounts receivable and it?s all money that is to be paid by the business to its creditors or lenders. The lease on the building, financial loans, taxes, salaries, all come under the accounts payable account. There are some vendors who give discounts to buyers if they make the payment on time or ahead of the stipulated date. A company needs to be aware of its accounts payable to make sure that it can use the discounts as well as keep tabs of how much money goes out of the business and when.

Order entry is the extension of accounts payable and accounts receivable. When a business makes the payment it owes, or when it gets the cash it was owed, then the company would have to make an entry in its book of records. As always, the accountant needs to make sure of accuracy while making these entries.

Inventory management is an additional aspect of small business accounting and it?s one of the most crucial aspects. With appropriate inventory management, a company wouldn?t need to face situations where it needs to forgo purchasers because of unavailability of inventory. The business would additionally have the ability to know how much money it has tied up in its inventory as products.

To ensure that the business operates smoothly, ordering inventory on time is imperative. Cost accounting, payroll maintenance, and management accounting are some of the additional factors associated with small business accounting. Correctly maintained accounts will lead to the growth and efficient functioning of the company.

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Source: http://art.redbright.co.za/small-business-accounting-is-a-critical-part-of-your-business/

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