Most business owners are guilty of this financial blunder. Similar to the half -committed resolutions we make every year to eat better and do more exercise, the vague promises companies make to keep their books clean and up to date are tossed out the window by the second or third month in.
With the start of a new year inspiring rejuvenation, we are all finding new ways to declutter, improve, and make room for efficiency, therefore making this a great time to take a good look into your company’s accounting.
Before finding it in an even greater disarray.
All of our clients come to us looking to find new ways to cut unnecessary costs, improve their financial health, and generate more profit, so we created this page of must-know tips on ways to clean up and improve your business’s accounting.
- Finalize Journal Entries
No matter the stage of your business or it’s size, you understand the importance of documenting each of your company’s transactions. Journal entries are an effective way in doing so, allowing you to keep track of your business purchases, sales, client invoices, and payroll. Keeping track of all of your business expenses provides you with a clear picture of your financial standing.
It’s also important to take the time to meet with a financial expert and review/record any pending accrual/deferral journal entries. Recording backlogged entries will provide more accurate financials so that you can make more informed decisions and better safeguard against any unforeseen financial issues.
2. Document Your Receipts
Every single receipt must be accounted for and properly recorded. Whether you periodically take your clients out to lunch or you frequent office supply purchases, proper record keeping and documentation will help ease the process in the event of an audit.
Save yourself any undue hardship by committing and making it an effort to properly record each of your business receipts.
3.Check the Profit & Loss and Balance Sheet Statements
It is imperative that you review your business’s Profit & Loss and Balance Sheet statements to verify that all entries were accurately booked.
We have a lot on our plates as business owners, and it’s common to feel that there’s just not enough hours in the day. When you find yourself in a rush, this can sometimes lead to recording transactions in the wrong ledger account.
This mistake can create inaccurate financial statements, which can later create challenges during the next tax season. With this in mind, take the time to review your enterprise’s financial statements to keep all transactions accurate.
Never skip this step!
4. Bank Reconciliations
In order to keep your company’s financials in order, make sure to perform bank reconciliations for each month. This keeps your bank balances in order while ensuring that every transaction is accounted for.
In doing this, you may discover that you were charged twice for a company purchase or there is still an outstanding invoice that needs to be paid.
5. Examine Your Budget Versus Actual Expenses
As you work to clean up your business’s finances, evaluate your budget versus actual expenses and take corrective action where there are large variances.
For example, you may discover that you are subscribed to monthly software platforms you no longer need, paying for unnecessary file storage, and tied to other expenses that negatively impact your bottom line.
Understanding the variances between budget versus actual expenditures will help you take corrective action in future periods sharpening your decision making skills.
6. Close Your Monthly Financials
To properly balance your company’s checkbook, close your monthly financials up to the most recent month. If you don’t keep up-to-date financial statements, you won’t be aware of any financial issues, thus forcing you to blindly run your company.
By consistently maintaining your business finances, you and any other key decision makers in your company will have the information needed to reach new levels of success while opening the doors to further opportunity.
We have all- at some point or another – entered a new year with high hopes and an “all or nothing” approach. While establishing business resolutions is a great way to set you up for improvement, sometimes committing yourself to too much can have negative implications.
In order to retain a solid grasp of your company’s financial health, you must consistently finalize your journal entries, document all receipts for expenditures, and analyze your Profit & Loss and Balance Sheet statements. Also, make sure to perform bank reconciliations, examine your budget versus actual expenses, and close your monthly financials. While completing all of these steps is critical to support your businesses long term growth, it’s a lot of responsibility.
And this is all in addition to running your business.
At MCDA CCG we strongly believe in the power of consistency and that each of our clients should be able to achieve it without sacrificing even more than they already do. You should have the choice to delegate some of your heavier responsibility without the high price tag.
Reach out to one of our team members today to learn more about how we can take off some of your accounting burdens and free up more of your time based on your own terms.