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June 07, 2021 | Posted in:

Why Decluttering Data is Good for Your Bottom Line

Business owners are more aware than ever of the need for accurate and timely data, yet keeping it that way is a major issue. In a recent survey by Experian, executives said that 25% of their company’s information is inaccurate and this hurts the bottom line.

 

This is the perfect time to do some data “spring cleaning.” One great place to start is with your accounting and financial records. If you are a small business owner, here are five questions to ask yourself.

 

1) Are you in the cloud?

Being able to access your accounting records anytime, anywhere, and from any device lets you make immediate decisions with real-time data. It also allows instant collaboration with your accountant so that you can both see your finances at any moment.

A good cloud-based accounting system will allow you to store copies of invoices and contracts as attachments to transactions so you won’t waste time searching for the backup in a different place.

 

2) Do your banking and credit card transactions automatically feed into your accounting system?

Taking advantage of automated imports of transactions is a real time-saver and reduces human input error.

 

3) Are all the prior year adjusting journal entries posted?

While preparing your tax return, your accountant will make some adjustments. If you are in the cloud, they will be able to easily post these adjustments directly to your system to align the correct opening balances and the prior-year amounts with your filed tax return.

 

4) Do you have any duplicate or unused accounts in your chart of accounts?

These should be merged or marked as inactive so that no current transactions accidentally get posted to old accounts.

 

5) Are your reports detailed enough?

Being able to produce reports by product line, location, division, or salesperson can help you make more informed decisions. Make sure your accounting system allows these types of classifications and that you set everything up to take full advantage of the reporting features.

 

Getting organized and maintaining good data.

Time spent searching for files is unproductive time, so decluttering your files can be a wise investment.

Unfortunately it’s not as simple as deleting everything. Knowing what to purge, what to archive, and what to keep takes planning. Old records are important for backup, IRS audits, compliance, and can support future decision making. Here are some tips on how to get started with a data organization policy.

  • Scan, file, and shred as soon as you are finished with a physical document.
  • Create a company-wide standardized file naming policy for consistency and easier searches.
  • Routinely delete stale data and archive old, but important files.
  • Make sure you have data backups.
  • Review Alloy Silverstein’s Record Retention Guide on our website.

 

The summer is the perfect time to talk to your accountant about making small changes or converting to a more suitable system before we have to start thinking about taxes again.

 

Author:

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