SETTING UP OF ACCOUNTING SYSTEM AND PROCEDURES
Every corporate entity needs to have an efficient accounting system and several procedures. Maintaining proper ledgers, sub-ledgers, cash flow, taxation, cost control, budget control, policies relating finance are all very important in the business world that every company should accept. Basic standard accounting practices will help in ensuring proper business policies by helping gain profits and minimize losses in the business.
Every active business or organization has to follow bookkeeping to keep track of the revenue, expenses, assets and liabilities to ensure aligned financial management. Following step-wise procedures of the accounting cycle ensures that the company shares better insights to the stakeholders, potential investors and it will help in accentuating goodwill of the company. For the same reason, organizations have to comply with the accounting standards and procedures to avoid any problems and to maintain transparency of the financial records for a healthy growth of the company.
Some accounting procedures that Spectrum recommends:
Basic Structure of Books of Accounts: Any accounting work starts with a basic work of setting up of chart of accounts. Once we have a proper chart of accounts set up in the accounting software/ ERP system based on the requirements of the business half of the work relating the understanding the financial reporting is done. That is the reason you need to have opinion of the expert while setting up of the chart of accounts.
Standard Management Information System (MIS):A properly organized accounting system should be able to produce a variety of integrated reports that help the management to plan their strategies, track the performance of the segments, departments and organization and analyze results of the organization as a whole.
Internal Controls:The accounting system should also consist of various controls in the process in such a way that it protects the business against errors and potential fraud using internal controls. Having sufficient and appropriate internal controls is a very strong and highly recommended precautionary measurement for any organization and it is more important for a company which is growing.
Cash Flow Management System:The success of any organization primarily depends upon effective management of the cash flow of the organization in addition to operational efficiency. Having proper cash flow management system helpsin having enough funds to pay your bills well in time. Cash flow management system includes projecting the organization’s financial situation with cash flow statements, receivables aging reports, monitoring the credit availability and maintaining cash reserves sufficiently.
Debt Management System: One need to have enough controls and proper procedures to track and maintain the debt structure of the company and it is more important for companies which run business with debt or various credit facilities taken from banks and other financial institutions. If we default any of the debt repayment schedules or do not meet the various covenants agreed with the banks, it deteriorates the credit worthiness of the company in addition to penalties.
System to handle Compliance:You can meet your legal obligations by setting procedures for properly handling your customs, excise tax and Value Added Tax (VAT) requirements, employees’ compensation requirements, insurance payments and year audit report preparation requirements. Work with a tax expert if your accountant is primarily a bookkeeper to make sure you don’t end up with legal non-compliance and penalties.
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