Attaining GAAP compliance is as simple as 1,2,3 with the simple GAAP compliance checklist. Contact John F. Dennehy Jr. CPA, PC today to get started.
Traditionally, achieving GAAP compliance has been a daunting and overwhelming process for businesses. GAAP or the generally accepted accounting principles serve as the standardizing accounting rule book for several businesses across the United States.
All publicly traded companies in the U.S. are required to adhere to the rules of GAAP, but private companies are not. Even so, savvy small business owners find countless benefits in utilizing this universal accounting system over alternative methods of accounting.
The following information is designed to provide more insight into GAAP compliance and offer an easy GAAP compliance checklist for small businesses.
What Are the Generally Accepted Accounting Principles?
Since the early 1970s, the Generally Accepted Accounting Principles (GAAP) has been the standardized accounting system for publicly traded companies. These accounting principles were initially implemented so investors could easily compare different industries and businesses.
GAAP is a continually changing set of accounting "best practices." It continues to evolve to most accurately reflect the current way business is conducted. GAAP compliance is governed by the Financial Accounting Standards Board (FASB), which is made up of representatives throughout the accounting industry.
Benefits of GAAP Compliance
Although private companies may not be required to be GAAP compliant, it pays dividends in the short and long run. Most banks and lenders will not consider lending money to a business without the proper GAAP-compliant financial records. If you fail to have the proper documents, a bank or lender will typically ask you to hire an expert to retroactively prepare the proper financial statement under GAAP methods.
In addition to providing lenders and banks with more insight into your business, GAAP methods provide owners with superior way to predict future cash flow. It can even empower you to diagnose potential issues in your earning capabilities before they become meltdowns.
Compliance Issues with GAAP
For most small businesses, the complications with GAAP are not related to the fundamental, daily operations. Most businesses are already using the GAAP standards to:
- Record expenses and revenue
- Depreciate and capitalize assets
- Account for inventory
The problem for small businesses are in the sheer number of standards and rules that must be followed. While major corporations have an entire team of internal accountants, small business owners that attempt to prepare their own statements may be met with standards overload.
Simple GAAP Compliance Checklist
1. Hire the Accountants of John F. Dennehy Jr. CPA, P.C
The first and most important step a business can take to ensure it's GAAP compliant is to hire a skilled accounting firm. Accountants earn their living based on their ability to keep up with the changes and understand the rules of GAAP. Even though the most basic elements of GAAP are not difficult, more complicated transactions will require the expert knowledge of an accountant to ensure compliance.
2. Ensure Your Employees Are Trained
Accountants are only able to oversee a company's books, but they cannot supervise the operation of the company. Accountants rely on the company's employees to provide the right financial information. As a result, it's imperative the employees of the company understand their individual responsibilities for GAAP compliance and follow through on their end of the deal.
3. Schedule Financial Audits
With financial audits, you hire an external accounting firm to conduct a complete analysis of your financial statements. This includes cash flow statements, balance sheets, income statements and owner's equity statements.
During the audit, the accounting firm will carefully comb through the statements as well as the transactions behind them. In the end, the goal of the financial audit is to determine whether your expenses, revenue, liabilities, and assets are being reported in compliance with GAAP. The audit serves as an invaluable tool for management as well as GAAP compliance.
Contact the One-Stop-Solution for GAAP Compliance
Since most small businesses do not have the resources to hire a full time accountant, John F. Dennehy Jr. CPA, PC offers scalable solutions to meet the unique needs of your business.
Regardless of the size of your business, we will work closely with you to develop a solution that provides you with the most accurate information and to ensure your business is GAAP compliant.
As your one-stop-solution for GAAP compliance, we will work closely with you and your employees to ensure they understand the proper way of conducting and registering transactions. We also provide expert audit services to ensure the transactions behind the numbers are in line.
Contact John F. Dennehy Jr. CPA, PC today to schedule a complimentary consultation.