If you’ve recently set up, or are in the process of setting up a business you’ll know that at some point, you’ll need to look at your accounting systems and processes to make sure you’re compliant with U.S GAAP and other accounting norms. Each business may need to focus on separate areas for accounting.
For example, if you’re a business with lease obligations you’ll need to focus on lease accounting and most likely the FASB 842 accounting update.
Here are some top tips to help you regarding your business accounting practices.
Entering Into A Business Lease? Don’t Forget FASB 842
The majority of businesses in the United States have entered into some form of lease. This can be a lease for a property, for industrial machinery, or for computers. Anything that helps you gain more revenue. There are two types of lease, one where you rent the item, and one where you pay it off over time. They’re usually known as capital or finance leases.
The new lease accounting standard, ASC 842 has recently come into force. Some know it as FASB 842 but the reality is that FASB is just the issuing accounting board, the actual standard is ASC 842 and essentially it now dictates that most leases are brought onto the balance sheet.
If you’re a new business this might not hamper you too much because you can just start using the new lease accounting standards right away. Older businesses have to transition, and that can be time consuming.
In short, when you get set up as a business if you enter into any lease arrangements don’t forget FASB 842.
Keep Business and Personal Finance Separate
One of the best ways to keep personal and business finance separate is to open separate bank accounts for each. This makes it easy to track and categorize income and expenses, and ensures that personal funds and assets are protected in the event of a legal issue or bankruptcy.
Additionally, having separate credit cards for each can help to keep finances organized, and can make it easier to keep track of expenses for tax purposes.
Another important step is to maintain accurate and up-to-date bookkeeping records for both your personal and business finances, which can help you to identify trends and make informed decisions. By taking these steps, you can maintain clarity and control over your finances and ensure that your personal and business finances remain separate.
Focus on Keeping Great Financial Records
Keeping good financial records is crucial for making informed decisions and staying on top of your finances. Here are some steps you can follow to keep good financial records:
- Document all transactions: Keep track of all income and expenses, no matter how small, and be sure to include the date, amount, and purpose of each transaction.
- Use software or tools: Utilize financial management software or tools, such as spreadsheets, to organize and categorize your transactions. This will make it easier to track your spending and see where your money is going.
- Reconcile bank statements regularly: Review your bank statements and reconcile them with your records on a regular basis to ensure that all transactions are accounted for.
- Store receipts and invoices: Keep receipts and invoices for all transactions, as they may be needed for tax purposes or in the event of an audit.
By following these steps, you can ensure that your financial records are complete, accurate, and up-to-date, which will help you to make informed decisions about your finances.
Choose The Right Accounting Software
Choosing the right accounting software can help you streamline your financial processes and make it easier to manage your finances. Here are some things to consider when choosing accounting software:
Features: Consider what features you need, such as invoicing, expense tracking, payroll management, and reporting capabilities.
Ease of use: Look for software that is user-friendly and intuitive, with a clear and straightforward interface.
Integration: Choose software that integrates with other tools and systems you use, such as your bank account or payment processing system.
Cost: Compare pricing options for different software, and choose one that fits within your budget.
Customer support: Look for software with a reliable customer support team that can help you with any questions or issues that arise.
By considering these factors, you can choose the right accounting software for your business, and ensure that you have the tools you need to effectively manage your finances.
To Conclude
To wrap up, there are a few key things to learn about accounting and the interaction between it and business. Once you’ve picked it up and are following pretty well you’ll find things pretty easy. It’s just about getting into a good habit and following it, especially when you consider FASB 842 and lease accounting.
Also read: Best Online Bookkeeping Services for Your Business
