What are the modern best practices in accounting and bookkeeping for small to medium-sized businesses?

I have been an Accountant for over 10 years, working with companies across various industries such as Legal, Nonprofit, and Software. Outside of corporate, I have worked with small businesses in e-commerce, real estate, and financial services. While each industry has its differences, the fundamentals of accounting remain similar. Ultimately, it comes down to one key question: how much do you keep so you can grow and invest more?

Here’s the cycle leading to year-end (tax season):

1. Plan with a Budget and Tax Strategy: No matter what software you use (QuickBooks has a great budget planner), start by forecasting your revenue and estimating expenses—both fixed and variable. Use last year’s expenses as a baseline and adjust for inflation. Collaborate with a tax professional to stay updated on current policies and how to align them with your goals.
2. Track Performance Quarterly: Analyze your first-quarter results and review potential sales opportunities. Strive to meet these targets while keeping expenses in check.
3. Review and Adjust Regularly: On a monthly or quarterly basis, compare your actuals to your forecasts. Use these insights to adjust your predictions for the next period. The key is continuous improvement.
4. Stay Organized and Document Everything: Keep detailed notes on what worked, what didn’t, and why. Staying up-to-date and organized is essential.
5. The fundamentals are straightforward: be clear about your expectations, use software that fits your needs, and understand your financial statements and goals. There are no shortcuts—success comes from consistent effort and informed decision-making.

If you need help navigating QuickBooks, creating a budget, or developing a tax plan, feel free to reach out. I’m here to guide you every step of the way. I hope this helps!

There Are Some Modern Practices that I have Identified During my Practice.

Cloud-Based Accounting Software

• Use tools like QuickBooks Online or Xero for real-time data, automation, and integrations.

Automation

• Automate invoicing, recurring transactions, and bank reconciliations to save time and reduce errors.

Accurate Record-Keeping

• Maintain digital records, separate business/personal finances, and keep clear transaction logs.

Timely Financial Reporting

• Generate monthly/quarterly financial statements (P&L, balance sheets) and use real-time dashboards.

Internal Controls & Security

• Limit access, back up data, and implement fraud prevention measures like dual authentication.

Outsource or Hire a Professional

• Consider outsourcing to an accountant/bookkeeper or hiring one as the business grows.

Tax Planning & Compliance

• Stay aware of local tax laws, set aside funds for taxes, and consult a tax professional for optimization.

Cash Flow Management

• Regularly forecast cash flow, monitor receivables, and manage expenses to ensure liquidity.

Use KPIs

• Track KPIs like profit margins and ROI to evaluate performance and adjust business strategy.

Regular Audits

• Conduct internal and external audits to ensure accuracy and compliance, correcting discrepancies promptly.

These practices ensure efficiency, accuracy, and scalability for SMBs.

I will try not to use AI like others did above.

Small and medium-sized enterprises often face challenges in managing their finances. Owners frequently have a hard time figuring out where their hard-earned money was spent, tracking down profit-eaters, and tracking accounts receivables.

This can be addressed by maintaining proper books.
1) What should you use? QuickBooks, Xero, FreshBooks are some of my favorites that are       guaranteed to make your life easier. 
2) Keep receipts and bills on computer with proper folder structure like year> month> Client/ supplier. Also attach these documents to QuickBooks or whatever you use so you always have it handy no matter whenever you want to take a look at it.
3) Design a custom Charts of Accounts for your business which makes sure all major expenses and incomes are duly categorized. You can always pull up your PnL and see what category exactly is generating profits and which are causing losses.
4) Reconcile your books periodically so you're not missing any transactions.
5) Use Accounts receivables\ payables report feature to send reminders about unpaid invoices and ensure timely payments to your suppliers, if any.

These are the tips that come to my head as of now, if you need more help or free advise, please reach out!
 

Essential Accounting and Bookkeeping Practices for Small and Medium-Sized Businesses

Accounting is no longer just about balancing the books—it’s about using modern tools and smart strategies to drive business growth. Whether you're a startup or a growing SMB, here are the top practices to streamline your finances and stay ahead of the curve.

1.. Set Clear Goals and Milestones

Use your financial data to set measurable goals—like reducing operating costs by 10% or increasing revenue by 20% in the next quarter. Clear targets give you direction and make bookkeeping a more strategic activity.

Adopt Cloud-Based Tools for Flexibility

Modern accounting software like FreshBooks, QuickBooks, or Xero is a game-changer. These tools provide real-time financial insights, automated tracking, and seamless collaboration with your accountant or team, no matter where you are.

2. Go Beyond Manual Work: Automate What You Can

Automation reduces errors and saves time. Set up auto-categorization for expenses, schedule recurring invoices, and use apps like Dext or Expensify to digitize receipts. The fewer manual entries, the more accurate your records.

3. Establish Strong Internal Processes

Create a system for managing your books consistently. This includes defining workflows for recording expenses, approving purchases, and reconciling accounts. A solid process reduces the risk of missed transactions or delays.

4. Keep Personal and Business Finances Separate

Mixing personal and business accounts can lead to confusion and tax issues. Use a dedicated business bank account and credit card to keep everything clear for bookkeeping and tax preparation.

5. Conduct Bank Reconciliation Frequently

Bank reconciliation isn’t just a once-a-year task—it’s a habit. Review your accounts weekly or monthly to ensure your records align with your bank statements. This helps prevent errors and keeps you in control of cash flow.

6. Maintain an Emergency Fund

A cash reserve isn’t just for personal finance—it’s a lifeline for your business too. Set aside a portion of your profits to cover unexpected expenses or seasonal slowdowns, so you don’t rely solely on credit.

7. Embrace Paperless Accounting

Digitize all receipts, invoices, and documents to reduce clutter and improve accessibility. Tools like Google Drive or Dropbox, combined with receipt-scanning apps, can help keep everything organized.

8. Track and Measure KPIs Regularly

Financial health isn’t just about profit. Monitor critical metrics like cash flow, debt-to-income ratio, and accounts receivable turnover to understand how well your business is performing and where to adjust.

9. Review and Update Your Budget Quarterly

Your budget shouldn’t be a static document. Review it quarterly to assess spending, forecast revenue, and align your financial goals with your actual performance. This keeps your business on track even in changing circumstances.

10. Invest in Professional Help

Whether it’s hiring a part-time bookkeeper or outsourcing to an accounting firm, don’t hesitate to seek expert help. Professionals can handle complex tasks like tax planning, compliance, and financial analysis, freeing you to focus on growth.

11. Leverage Integrations to Simplify Processes

Many accounting platforms integrate with payment processors, e-commerce sites, and payroll systems. Use these integrations to centralize your data and streamline workflows, avoiding the hassle of manual imports and exports.

12. Stay on Top of Tax Changes

Tax regulations are constantly evolving, and staying informed is critical. Partner with a tax professional who understands your industry, or subscribe to updates from relevant government agencies to avoid penalties.

13. Plan for Scalability

As your business grows, your bookkeeping needs will change. Choose software and processes that can scale with you, whether it’s managing additional transactions, employees, or multi-currency accounts.

14. Schedule Monthly Financial Checkups

Don’t let financial reviews pile up. Dedicate time every month to review income statements, balance sheets, and cash flow reports. Spotting trends early can help you pivot strategies before issues arise.

Final Words

Efficient accounting isn’t just about compliance—it’s about building a foundation for sustainable growth. By integrating technology, automating processes, and staying proactive with your finances, you can make smarter decisions and focus on growing your business.

Remember, the key is consistency. The more organized your books are, the more clarity you’ll have to make bold moves for your future.

1. Embrace Cloud-Based Accounting Software 

• Tools: QuickBooks Online, Xero, Wave, Zoho Books, etc.

Benefits:

• Real-time access to financial data from anywhere.
• Automatic data backup and security.
• Seamless integrations with payment processors, CRMs, and inventory management systems.

2. Automate Routine Processes

Examples:

• Use Hubdoc or Receipt Bank to digitize and categorize receipts and invoices.
• Set up bank feed automation to reconcile transactions automatically.

Result: Saves time, reduces errors, and improves efficiency.

3. Implement Robust Internal Controls

Key Steps:

• Segregate duties to avoid fraud (e.g., separate invoicing and payment approvals).
• Use approval workflows for expense claims and payments.
• Regularly review financial records and reports.

Outcome: Strengthens the integrity of financial data.

4. Maintain Timely and Accurate Records

Best Practices:

• Update books regularly (weekly or monthly).
• Use checklists to ensure all transactions are recorded.
• Conduct monthly reconciliations for bank accounts, credit cards, and loans.

Impact: Improves cash flow management and audit readiness.

5. Stay Compliant with Tax Laws and Regulations

Steps:

• Use tools like Avalara for automated tax compliance.
• Track tax-deductible expenses and maintain organized records.
• Partner with a professional accountant to stay up to date with changing tax laws.

Why: Avoids penalties and maximizes tax benefits.

6. Adopt Paperless Workflows

Methods:

• Digitize documents and store them in cloud systems.
• Use e-signature tools like DocuSign for approval processes.

Advantages: Saves space, reduces clutter, and enhances sustainability.

7. Outsource Non-Core Functions

Why:

• Access expert services for bookkeeping, payroll, and tax filing.
• Focus on core business activities.
• Reduce costs compared to hiring in-house staff.

Who: Freelance bookkeepers or firms with expertise in platforms like Xero or QuickBooks Online.

8. Educate and Train Team Members

Provide training on:

• Accounting software.
• Fraud prevention and financial controls.
• Tax regulations and compliance requirements.

9. Regularly Review and Update Processes

• Periodically assess workflows to identify inefficiencies.
• Adopt the latest tools and technologies for improved operations.
• Stay informed about industry trends and best practices.

Move to the Cloud: Switch to cloud-based accounting software like QuickBooks, Xero, or FreshBooks. Access your books from anywhere, collaborate with ease, and never worry about losing data.

Automate What You Can: Automate data entry by linking your bank accounts and using tools to scan receipts. It saves time, reduces errors, and keeps things tidy without extra effort.

Reconcile Regularly: Weekly or daily reconciliation keeps your books accurate. Fixing small errors as they come up is much easier than dealing with a big mess at the end of the month!

Snap Expenses Easily: Use apps like Expensify or Dext to categorize and track expenses. Take a quick photo of receipts, and boom—you’re all set for tax time.

Forecast Cash Flow: Get a handle on cash flow by forecasting inflows and outflows. This helps you see when to save or when it’s okay to splurge a bit for growth.

Consider Outsourcing: Bookkeeping not your thing? Outsourcing to a bookkeeper or virtual CFO can be more efficient. Get the expertise you need without the full-time cost.

Prioritize Data Security: With financial data online, cybersecurity is a must. Strong passwords, two-factor authentication, and compliance with privacy rules keep your business safe.

Track Key KPIs: Keep an eye on the numbers that matter—like profit margins or accounts receivable. Tracking KPIs gives you a real-time health check for your business.

Be Tax Ready Year-Round: Save yourself a tax-time headache by organizing receipts and tracking expenses throughout the year. A tax professional can help you stay compliant and maximize deductions.

Monthly Check-Ins: Review your financials monthly (or quarterly). Regular check-ins help you adjust strategies and celebrate wins, giving you a clearer view of where you’re headed.

Connect Accounting with CRM: If you have a CRM, connect it to your accounting software. It’ll give you insights into customer payments and profitability so you can make smarter credit and service decisions.

These small steps can streamline your bookkeeping, free up time, and give you the financial insights you need to make decisions confidently!

With the growth of AI in the field of the Bookkeeping and Accounting; we should always be focused on the correctness and accuracy of the numbers presented in the books of accounts for the company. The modern best practices for the small to medium sized businesses are as follows;

1) Document Management: It is critical to tag in the supporting documents for the business expenses and sales. A separate cloud based storage with a date tagging for each bills and invoices will give a major control over the business numbers.

2) Budgeting or Projection: Projection or Budgeting is vital for small and medium-sized business. It will present the roadmap into the future business for the company. It will also be critical to measure any variations or deviations in terms of actual results.

3) Segregation of Personal and Business Accounts: The important yet the most neglected practice for the startup and the medium sized business enterprises is segregation of the business and personal expenses. The use of the personal account for the business or the personal expenses from the business expenses should be minimized; if possible should not be done at all.

4) Time Booking: Often observed with the startup and medium sized business is the failure to capture or book the cost of the owner's time. It doesn't necessarily have to be in terms of the Owner's Pay but also to incorporate the important component while setting the price for the products or the services that the companies provide. It will ensure the sustainable growth.

5) KPI Measurement: Every numbers represented by the income or the expenses of the business is important for the business. For example, every dollar invested in the social media marketing is vital to measure the impact it created in the total revenue, amount expensed off for staff training program is important to measure the improvement in employee efficiency and growth.

These mentioned points are the most important practices in the bookkeeping and accounting processes for the startup and medium sized enterprise yet they are the most neglected. It will play a crucial role for the growth of the startup in the longer run in a more sustainable manner.