Accounts receivable and accounts payable are the two main factors that affect your business cash flows. Managing both is an important skill that needs to be mastered for an effective financial stability. It also helps boost the overall performance of the company and avoid cash problems. Properly tracking accounts receivable and payable involve the creation of invoice on time, delivering the receipts, tracking the shipping orders and maintaining financial transactions. Here are a few tips that will help you in managing accounts payable and receivable in an effective and efficient manner.
1. Organize Your Transactions
Be organized and send out invoices immediately after the transaction has been completed. For a regular delivery of goods or when goods are taken on credit, send the invoices when they are due. It may be difficult to remember all the transactions for which payments are expected in future. Hence, make sure you keep a proper record system and organize all your transactions. See to it that your accountant effectively organizes all your transactions as your books contain valuable information and prevent you from forgetting or making incorrect invoices. For businesses that have multiple transactions daily or weekly, it is difficult to track different transaction details from different vendors. In such cases, it is strongly recommended that you prepare books of account. In case you need help in creating your books of account, then consult a professional bookkeeping firm to assist you in this matter.
2. Establish Timelines
When you send out invoices, be clear about the payment deadlines and penalties like an interest charge for overdue accounts. It will not only ensure that your debtors pay on time but also prevent bad debts. When establishing timelines, keep it for a short time. The aim should be to close out a transaction as early as possible.
At the same, establishing timelines can also ensure that you are paying your debts on time. You do not attract any interest rates and plus, establishing timeless will help you have sufficient funds readily available as and when the payment dates are due.
3. Initiate a Credit Policy
This should be a planned company process and not just decided by your accountant. When you consider establishing a credit policy for your company, keep these following factors in mind:
4. Use Automation for Tracking Transaction
Tracking can be a painstaking process especially when you do it manually. For a systematic process of tracking your daily transactions, use accounts payable and receivable software to automate transactions. Your transactions will be recorded in real-time and plus, it will allow you to avoid delinquency or interruptions in workflow. Tracking and managing accounts receivable and payable is important not only for assessing effectiveness but also to help the owners to make smarter financial decisions. Therefore, use automation as it will save you time and errors will be avoided.
Managing accounts payable and receivable can indeed be a challenging task especially when your business is growing. If you are facing any difficulty to manage both, then contact a professional to help you manage your accounts in a manner that will improve your working capital and finances.
QuickBooks are for small and medium-sized accounting businesses which help them to maintain basic accounting transactions. It offers on-premises as well as cloud-based accounting application system which records business payments, pay bills, and payroll systems. If you are a beginner, here are a few tips on how to use QuickBooks.
1. Backup your Files Regularly
QuickBooks deals with your financial files, reports, and customer information. It is of utmost importance that you always save your work like you would do for any other application such as Word Documents. Backing up your files regularly will help you retain crucial data in case you delete or lose your files due to some reason.
2. Customize Navigational Panel
One of the most difficult tasks of learning a new software is to get used to some regular functions. QuickBooks includes a navigational panel which can be customized as per your liking. Ensure that you set this up early so that you do not have to keep looking for certain function repeatedly.
3. Use QuickBooks Memorized Transactions
QuickBooks’ memorized transactions is a great tool. Entering any bill, cheque payment, invoice or a journal entry that is occurring regularly can be a time-consuming task. Your transactions can be auto-recorded by QuickBooks’ memorized transactions. Memorized transactions help you to handle your cash flow better as it will record the transaction details which are going to occur in the future. Also, this feature prevents you from missing out on any payment or collection.
4. Print Checks and Pay Bills
Printing checks from QuickBooks will increase efficiency by reducing unnecessary data entry. It also helps make your monthly reconciliations smoother.
Efficient management of entering and paying bills is made possible with QuickBooks. When making a payment, either use online bill payment linked to QuickBooks or print your checks.
5. Set Up Invoices For Online Payment
Online payment options can be set up to allow your clients to pay online via ACH bank transfer or PayPal. You will be charged a small fee but it’s worth considering the amount of time you will save in making the payments.
6. Use QuickBooks Find Feature
This feature can come in very handy when you need to find a transaction that you need to check again or need more information. With the help of the find feature, you can search inside QuickBooks itself and quickly get your desired information.
QuickBooks is a great way to help your business in recording accounting transactions. It makes your life easier. However, if you want to know how to use QuickBooks extensively, it is recommended that you consult a professional firm that will provide training for QuickBooks.
No one wants to get called by the Canada Revenue Agency (CRA) and be told that your business is being audited, but this is part of the government process. This is CRA’s way of ensuring businesses are paying their taxes and you will help keep this system running. Apart from a call, CRA may send a letter beforehand so that you are aware.
So how do your prepare your business for a CRA audit?
CRA is auditing your records because of any of these three reasons:
- Dig up Six-Year-Old Documents
As a rule, you should have stored business records of the last six years. However, CRA auditors are not going to go through all of them and they will ask for business records for the last two years.
- Original Documents
You need to present original documents and not copies. This includes receipts and other financial documents. Not even your credit card statements qualify.
- Which Documents
This is specifically if you use your business to reimburse your employees and your personal accounts for things like transport, food and entertainment.
- Car: CRA will want a detailed log of your car used for business and this includes a record of the starting mileage, the name of the persons you visited and the relative mileage. If the use of the car is personal, then it must be indicated in the log. The CRA auditors will want to see the recorded mileage for personal and business use. If you haven’t kept a mileage log book, then they might agree on a percentage use of the car for the business, though it will be lower than what you actually use.
Ideally, you should have a mileage book and original fuel receipts (as credit cards statements are not accepted).
- Other Expenses: For other expenses that you claim reimbursement like meals and entertainment, you should have receipts.
At the Office
CRA auditors will visit you at your office. If you have a home office, they will visit that. You need to make sure that your home office is not your bedroom, but an actual place that you conduct business and meet clients.
Cooperate and Know your Records
CRA auditors won’t interrogate you, but they will thoroughly ask you questions. You will be asked many questions and some may even sound unrelated, but you need to answer. Don’t delay your answers, don’t answer "smartly", don’t try to give the wrong answer on purpose. You need to know the finances of your business so that you give the right answer.
Be upfront with the auditors. If you’re aggressive, they’ll be aggressive.
Have a Tax Expert with You
You don’t have to do this alone, you can do it with your tax expert, preferably your own accountant.An accountant can help by providing support, guidance, advice and be present in office with the CRA auditors. That way, if you don’t know the answer, the professional who handles your financial paperwork does.
Even if you have some accounting experience, it is best to get an accountant because there is a chance that things may become heated and tensed, and do you won't be able to give proper replies. Apart from knowing the ins and outs of your business's tax, an accountant can act a bridge between you and the auditors.
An audit from the CRA is not a walk in the park, but neither is it something to fret about. If you keep your books well and have not avoided paying taxes on purpose, you and your business will come out on top. For more information, check out what CRA says about business audits.