Running a business requires more than just keeping track of sales and expenses. Good accounting practices provide structure, clarity, and insight into the financial health of your organisation. At Long + Cowan Chartered Accountants Wellington, we help businesses manage finances strategically, improve cash flow, and plan for future growth.
Whether you are an established business or just getting started, these accounting tips can help you improve financial performance and make smarter decisions.
Sales Discounts and Discount Reserves
If your business offers early payment or cash discounts to customers, setting up a discount reserve can help manage this more effectively.
When customers pay early and claim their discount, it affects both your revenue and cash flow. To stay accurate, establish a reserve fund that reflects the total amount you expect customers to claim. This ensures your accounts match real-world activity and your sales figures remain clear.
Here is how to manage discount reserves correctly:
- Estimate the total likely value of discounts your customers will take.
- Create a reserve fund equal to that amount.
- When a customer takes a discount, credit the accounts receivable account and debit the discount reserve.
By doing this, discounts are recorded in the same accounting period as the associated invoices, giving you a more accurate financial picture and simplifying reporting at year-end.
Understanding Current Assets
Current assets are items your business owns that can be converted into cash within the normal operating cycle, usually within 12 months. Monitoring and managing these assets is key to maintaining liquidity and financial stability.
Typical examples of current assets include:
- Cash on hand
- Deposits
- Sundry debtors
- Cash floats
- Inventory and stock
Keeping track of these items helps you understand how quickly your business can generate cash and cover short-term obligations. It also helps identify areas where resources might be tied up unnecessarily, such as excess inventory or overdue payments.
At Long + Cowan Chartered Accountants, we help businesses assess their balance sheets, optimise asset management, and improve working capital so cash is available when needed.
Due Diligence When Buying or Selling a Business
If you are planning to buy or sell a business, due diligence is an essential step that ensures both parties understand the full financial picture. It involves analysing the company’s performance, financial position, and operational strengths to assess its true value and potential risks.
A typical due diligence process reviews:
- The business plan and financial projections
- Intellectual property and ownership records
- Market research and competitive positioning
- Debtors, creditors, and inventory levels
- Staff, contracts, and management capability
For investors, due diligence provides confidence that they are making a sound decision based on accurate and verifiable information. For sellers, it ensures transparency and builds trust, often leading to a smoother transaction process.
Once an investor completes this review, they will typically assess the pricing proposal to determine whether the purchase or investment aligns with their expectations.
Our team at Long + Cowan can help you prepare accurate documentation, review your financial records, and guide you through the due diligence process with confidence.
If you are considering buying or selling a business, contact us for more info by filling in an enquiry form or e-mailing or calling us during office hours, and our team will assist you with the next steps.
Why Professional Accounting Support Matters
Business success depends on more than hard work. It also requires clear financial insight, accurate reporting, and sound planning. Having a professional accountant ensures that every part of your financial management, from cash flow to compliance, is handled correctly.
At Long + Cowan Chartered Accountants Wellington, we provide tailored accounting, taxation, and advisory services to help businesses make informed financial decisions. With decades of experience and local knowledge, we give our clients the clarity and confidence they need to manage growth and improve performance.
If you would like expert support with accounting, financial planning, or due diligence, contact us for more info by filling in an enquiry form or e-mailing or calling us during office hours, and we will help you get started.
