Accountants are always learning, adapting, and understanding the nuances of their trade.
It’s important to recognise what is allowed and what is not. Is it legal to go ahead and use cloud networks for managing important tax documents? Is it important to maintain tax records for years? There are so many questions and it takes time to learn the intricacies of this profession.
In essence, bookkeeping is all about focusing in on these details and making sure the right adjustments are made in advance.
Here’s a look at the most important bookkeeping facts every accountant should know.
1) E-Invoicing is Legal and Optimal
This is one of the more new-age facts to keep in mind as an accountant and is a good starting point.
In general, most of the work has been done on tangible paper but that is starting to slow down with each passing year. E-invoicing is not only legitimate but is a great way to save paper while keeping things on a separate cloud network. The cloud network makes sure all relevant parties can access the documents whenever they need to. This saves time and is far more efficient in the long-term.
Plus, it is legal making it a no-brainer for all accountants!
2) Data Entry Does Not Have To Be Entered Manually
Yes, data entry does not have to be a laborious task where each number is typed in!
This is a huge misconception and is one of the main facts to keep in mind. Most machine learning solutions have made it easier than ever before to manage these details automatically. All of the data goes into the system and it learns how to compute the details. In fact, most accountants are now using this software to focus on important details and creating cleaner tax records.
3) Invoices Are Not Receipts
It’s important to know the distinction between invoices and receipts.
They are not the same thing! Invoices are legal documents and can be used in the court of law as proof of a financial transaction. While receipts are more of a personal reminder of the purchase and are not as foolproof in proving the legitimacy of a transaction.
Accountants are asked to understand these difference as it can make or break of tax records are prepared.
4) Conversion To Local Currency Is Essential
Yes, this is an important bookkeeping fact to understand and implement. Conversions have to be done for all financial transactions and they should be done based on the local currency. This is doubly important for those dealing with international suppliers. Do not dabble with multiple currencies as it can be confusing and lead to mistakes while filing taxes. Keep things to the point and focus on simple conversions at the time of the transaction.
5) Business-related Expenses Are Deductible
It’s always valid to claim expenses on one’s taxes but that doesn’t mean all expenses are legitimate! The expense has to be associated with the business in some way, shape, or form and cannot be confused as a private cost. For example, a real estate agent’s car is a valid expense but not the landscaping bills to his private property. The distinction is an important one to note down.
6) Tax Records Need To Be Stored For Pre-Determined Period
In general, bookkeeping involves the compilation of financial transactions, collections, and other important data. Most of this information is then used to produce active, legal tax records for the year.
However, one of the lingering issues to keep in mind is the holding of these tax records and the role a bookkeeper has to play. It’s important to understand how long the records have to be kept in hand before being flushed out by newer replacements.
A good rule of thumb is to aim for the 5-year mark and keep all tax records from now to that specific year. In most cases, businesses will continue to maintain their records year after year in case things were to change from a legal perspective. Please note, this is not only tangible advice for tax records but any relevant financial data associated with the business. Having all of this information on hand is never bad and can be a good way to stay on top of things!
These are the most important bookkeeping facts every accountant should know when it comes to managing relevant financial documents.
This information is important to keep on hand and maintain as time goes on because it will keep things as streamlined as possible. New issues start to pop up when an accountant is not paying attention to these details and lets simple errors creep in. Focus on these facts and build a reliable setup from the ground up. This is a wonderful way to maintain good records and file 100% accurate tax documents year after year.