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Good Practices in accounting
Because of the variable nature of the business, accounting keeping is important to track all work done and payments anticipated. Good work practices assist in these procedures. Good practice adds value to a business and ensures the business to be profitable. In PDR, the business goes through intense and unpredictable periods. Good practice ensures that during these intense phases the vital account keeping is up to date. Managers in small or large enterprises are able to be aware of the current finances and make appropriate decisions without financial risks
Yearly reviews
Yearly reviews provide some breathing space usually during a period with minimal stress. This is a time to reflect and plan for the year ahead strengthening successful strategies and avoiding making the mistakes from the previous year. In PDR, the most ideal period is outside the storm period which is if course in line with the end of the financial year June 30 in Australia. Good business practice during this review period is implementing specific strategies that can be put in place and reviewed at least quarterly, even monthly!
As suggested in previous modules, each person requires to be aware of their tasks and responsibilities. This is also true in terms of the accounting side as well. It may be useful to have a calendar with tasks on there which can be checked each day or perhaps a diary. This is especially crucial to PDR managers. All staff or members of the team should be aware of what key indicators will drive performance.
Aims of the good accounting practice outcomes
From a company standpoint, it is important to be aware of where all these good practices will lead to before one should proceed. At the end of the financial year, a typical PDR company will have a financial statement consisting of some or all these components. :
– profit loss statement
– current assets and non-current assets
– liabilities and non-liabilities
– revenue
– profit from ordinary activities – costs such as equipment, borrowing and associated depreciation
– income tax – expenses
– cash assets – bank account and other cash
– receivables – trade debtors, sundry debtors, entity loans
– tax assets – GST
– other assets – short term deposits
– property plant and equipment – cost and depreciation, motor vehicles and depreciation
– payables – trade creditors and other creditors eg Tax Office
– financial liabilities – eg loans from directors etc
– tax liabilities – taxation and amount withheld due to wages / salaries
– contributed capital – eg shares
– trading income
– cost of sales – purchases, commission
– gross profit from trading
– interest received
– expenses – broadly covering anything from your accountant, advertising, licensing and registration costs, computers, director salaries, cleaning, electricity, filing costs, plant and equipment hire, insurance, workers compensation insurance, vehicle insurance, fuel, tolls, maintenance, interest, internet and websites, postage, rent and land expenses, replacements eg tools, staff amenities, travel accommodation
Businesses may not be required to submit or prepare such financial statements by law. However, it is recommended to maintain some organised records of the above items. For instance, the situation may change and you may become a company later on. You may also wish to reflect on earnings and other data through the reports generated for future planning. It is also good practice since you need to monitor earnings and expenditure for the security of the business.
