Top 5 Accounting Best Practices for Your Business

March 28, 2022 Sarah Dameron

executives learning the best finance & accounting best practices

When it comes to corporate finance and accounting best practices, there’s a great deal to consider – recruiting and retaining top talent, accurately reporting financial transactions, setting (and sticking with) a budget, analyzing data, and then, applying those numbers to drive company growth. For any CFO looking to improve their accounting department, often as a means to growing the business, there’s seemingly no end to the advice on how to do so.

But what is most important? To simplify the top accounting best practices, we’ve outlined a few of the most essential updates, improvements and routines to increase your productivity and success this year and beyond.

  1. Establish or Improve Internal Controls

  2. Create & Maintain a Chart of Accounts

  3. Begin Your Year With a Budget

  4. Set a Routine of Closing Your Books on Time

  5. Hire a Reputable Outsourcing Firm

Establish or Improve Internal Controls With These Simple Finance & Accounting Best Practices

No one wants to be the victim of fraud, least of all a business, but that’s exactly what will happen without the proper policies and procedures in place to safeguard your company’s financials. A lack of internal controls can lead to misinformed financial decisions and reporting errors. In order to dodge the fall-out that will inevitably come from a lack of measures, here’s how you – a finance leader – can strengthen internal controls:

  • Implement a single accounting platform, rather than disparate systems that require manual processes and multiple versions of the truth.

  • Aggregate data. When data is centrally collected, uncharacteristic patterns and inappropriate activities can be more easily identified.

  • Staff the accounting department appropriately. This can be difficult for small to mid-size, cash strapped companies that are dealing with dwindling budgets.

  • Prioritize account reconciliations; they can be time consuming, but they help uncover discrepancies.

  • Document processes. Clear and updated desktop procedures should exist – don’t let processes only exist in peoples’ heads (tribal knowledge); use standardized templates, contracts, etc.

Create & Maintain a Chart of Accounts

accountant following the best accounting best practices for invoicing chart

If you’ve ever played the game Jenga, you know that taking a block away from the tower means you have to place the block elsewhere (typically on the top). The same can be said for organizing all the financial information pertaining to your business. A chart of accounts offers a clear snapshot of your company’s financial health. Think of it like a health summary you might receive after a doctor’s visit. So what exactly does a chart of accounts contain and why is it important for your organization?

There are five primary categories you will find in a chart of accounts:

  • Assets – the money owed to you on outstanding invoices.

  • Liabilities –any debts your business owes.

  • Equity – an ownership interest in a business.

  • Revenue – the amount your business earns from providing a product or service.

  • Expenses – the money your business spends in order to earn more money.

Once you’ve created a chart of accounts, you’ll know exactly where all the money in your business is coming from, what money your business owes, how to make better spending decisions, and how to make tax season much more efficient.

Begin Your Year With a Budget

cfo opening binder with the best finance practices

Every company needs a budget – whether you’re a startup, a mid-size business or a global organization. In fact, according to a study done by The Federal Reserve Banks of Chicago and San Francisco, more than 60 percent of businesses with excellent financial health always built a budget. A budget acts as a roadmap to where your company is going in the next year. However, before you can implement a budget, there are a few factors to consider (and put to paper):

  • Anticipated expenses – what you expect to spend for the duration of the year.

  • Projected income – the amount of money your company expects to make during the year.

  • Unexpected purchases – funds for emergencies and unforeseen but necessary expenditures.

Developing your budget at the beginning of the year isn’t just a one-time event. You should make it a habit to check-in with your budget each month to ensure your business is on track to achieve its goals.

Set a Routine of Closing Your Books on Time - Finance and Accounting Best Practices

company books with the best finance and accounting best practices

From the outside, closing the books sounds simple. However, anyone who does it month-in and month-out knows it can be a grueling task. By blocking out the time you actually need each month to reconcile your books, you’re doing yourself a favor (and saving yourself a headache). Make it a habit of reconciling accounts as soon as possible and stick to the routine so you don’t end up with a month-end fire drill. Here are a few steps to incorporate into your monthly closing process:

  • Set a date – choose a date and stick with it.

  • Create a checklist of closing tasks – make sure to assign tasks and set a due date that is before the close date.

  • Audit everything in your balance sheet each month – the last thing you need is to find discrepancies months or even a year down the road.

  • Utilize standard journal entries – these include fixed assets and lump sum payments.

  • Conduct a comparative analysis of your income statement – compare the closing month with the previous month to see if there are any inconsistencies.

Hire a Reputable Outsourcing Firm

outsourcing firm executives waiting to meet with owner of company

The worst thing you can do for your company is A. create a one-man accounting show or B. hire unqualified professionals to oversee the organization’s financials. Accounting is one of the most important functions of a business and depending on the nature and size of your company, in-house or staffing options may not work well for efficient on-time delivery or low-impact tasks. Moreover, most businesses will reach a stage where they need a third-party’s help with performing routine accounting functions and that’s where outsourcing comes into play.

At Personiv, our experts know that overseeing the finance and accounting function is hard work. That’s why we’ve compiled a list of finance and accounting best practices to help guide you to make the best (and most efficient) decisions for your department. Get in touch with one of our professionals to learn how you can better position your company for success.

Previous Article
How to Measure Success in the Accounting Department: What Are the Top KPIs
How to Measure Success in the Accounting Department: What Are the Top KPIs

Measuring success in accounting is about more than just crunching the numbers. It’s about getting the right...

Next Article
Leveraging Outsourcing as a Competitive Advantage
Leveraging Outsourcing as a Competitive Advantage

Outsourcing is a crucial way to boost your bottom line in the short term, however, one of its main advantag...