Excellent Accounting Practices and Their Importance
Accounting practices are the systems of procedures and controls that the accounting department or the accountants should use when recording business transactions. Ideally, there must be consistency in accounting practices. This means that the company should deal with all of its business transactions in exactly the same way so that the financial statements that it generates are always reliable.
Some of the excellent accounting practices that companies should adopt are as follows:
– the use of the same depreciation method (double-declining balance, straight-line, units of production, etc.) for fixed assets of the same category
– the use of the same calculation when identifying the amount the company should pay for the overtime its employees have worked
– paying the supplier invoices before the due dates
– issuing invoices (Also see How Do Purchase Orders and Invoices Differ from Each Other?) to clients on the day they deliver the products
If a company wishes to implement excellent accounting practices, it needs to periodically check whether there is any deviation from the mandatory process flow. By doing so, it will be able to spot any mistakes and correct the underlying causes as soon as possible. To conduct such a level of self-examination, the accountants of that company should be competent enough to have an in-depth understanding of the correct process flow and determine the area where the deviation from the fixed process has happened. Then, they need to come up with a systemic corrective action to rectify the mistake and think about how they can ensure that the related staff will implement the change properly in the process in the future.
As a business owner, if you are doing the accounting tasks on your own, it can be very challenging for you to implement good accounting practices and have the expertise to treat the problems stated above. However, good accounting practices are crucial if you wish that all your business books are well-organised and accurate. Also, auditors need to rely on consistent accounting practices when they are assessing the financial statements of a company. Thus, you should hire an accounting service Johor Bahru and let the experts help you. By doing so, you can have peace of mind about accounting chores and spend more time on other business activities (Also see Using Activity Ratios for Business Efficiency) that help in your company’s growth.
To implement excellent accounting practice, a company needs to install and update the best practices continually. This is to ensure that it is capable of improving the effectiveness and efficiency of accounting practices as time passes. Besides, this means that the accountants should be equipped with the skills of determining excellent accounting (Also see Inherent Risks in Accounting) practices as well as the ability to implement and track the changes they have made.