Quick Tips for Accurate BooksChris Schwalbach · January 24, 2017 · 2.7 min
Are your books accurate? Do you know where your money has gone? Which investments have worked and which have not? Where the most efficient places are to spend for growth? The key to accurate books, and having the information necessary to ultimately answer questions like these is a proper month-end close process.
I highlight 5 points below that will help you stay organized and keep meticulous track of your finances.
- Ensure all bills, payments, invoices, etc. are in the system. It may seem obvious that you would have all that information entered and recorded, but oddly enough, a missing piece (a bill, invoice, credit card payment, etc.) is much more common than you might think. With accounting, the results you show could be warped heavily if you’re missing something. Set up some checks, balances, and action items to ensure you have it all.
- Reconcile all of your balance sheet accounts. Reconciling your balance sheet accounts allows you to ensure that what happened in real life is what’s actually recorded in your books. Many people are likely reconciling their bank accounts (matching the bank statement to your financial system), but that’s usually just one of the many accounts that will need this attention. Inventory, prepaid expenses, deferred revenue, accounts receivable, accounts payable, assets, loans, and many other things are all good examples of what should be reviewed and reconciled monthly to ensure accuracy – not doing so could lead to big decisions made based on incorrect data, incorrect earnings, and more.
- Set a Close Date. Set a day, often a few days after the end of the prior month (it can take time to do all of the gathering in point #1), after which nobody is allowed to touch the books for the prior month except the person(s) responsible for closing. This promotes timeliness in your close (so you have your information quickly), and prevents anyone from altering your data after it’s been properly entered and reconciled.
- Draft Reports. You know your business best. Take the time to look to make sure it’s correct before showing reports to anyone. How do you do this? Run your month end reporting package and look for anything that may be off. Maybe your gross margins on your products are showing a 10% decrease over last month, but nothing in your process has changed – this may be a result of incorrect inventory or COGS entries. Maybe your payroll expense was 2x last month – this could be just an incorrect date in your system and an easy fix.
- Seek Some Help if you Need it. Accounting should be much more than a record of your business. It provides insight into your own specific data that you can use to drive your business forward. Getting it right is the first step towards growth. It’s not the best use of your time as a business owner, so look for help, as there are many pros out there who love this type of work and can free up your time, leaving you to continue your quest for world domination!
Follow these 5 tips and you’ll be well on your way to accurate bookkeeping, and a month end close process that will help accelerate your business.
By John Rose
AVL Growth Partners, 2017