As a business owner, do you find yourself falling behind in recording your financial transactions and balancing your accounts? It’s easy to let that happen when so many other important business tasks compete for your time.
The secret to staying caught up is to never allow yourself to get behind in the first place. That’s why a best practice for any business owner is to develop (and stick to!) a formal month-end closing of your business’ books. Make it part of the regular activities you do at the end of each month, without fail.
Why? Because closing your books every month gives you a clear picture of your business’ financial situation, allowing you to plan for the future. It also prevents or identifies accounting mistakes allowing for corrections to be made on a timely basis. In addition, filings related to taxes such as sales, payroll and other governmental reporting requirements can be done easily and accurately. You will also have all your documents in order should you need to prepare for an audit or want to apply for business financing.
Ready to get started? Here are some month-end closing tips:
Record all funds received during the month. Look at customer balances and make sure you aren’t missing any customer payments against amounts invoiced to the customer.
Record all bills received and purchases made. Vendor statement balances should be matched to what you have recorded, and purchases received
Reconcile your accounts. Match your accounting records to account statements from outside sources such as bank, credit card and loan statements. Fix any errors you find.
Review petty cash. Make sure you have recorded all receipts for items you purchased, which should allow you to match the balance of your petty cash fund and replenish accordingly.
Review fixed assets records. Ensure that purchases of building, equipment, vehicles, and land are properly reflected so that they can be depreciated over time.
Track and reconcile inventory. Performing inventory counts and matching to your accounting records will allow you to monitor your inventory levels so you can decide what items you need to replenish and how frequently.
Prepare and review financial statements. Review your general ledger to ensure transactions are properly recorded, and produce a profit and loss statement and balance sheet. In addition, create outstanding accounts receivable and payable reports and take action as necessary.
Closing your books each month will pay long-term dividends to you as the business owner. It will give you peace of mind that your financials are accurate and under control. Monthly maintenance also greatly reduces the chance that you will experience the frustration, loss of time, and potential costs associated with trying to untangle a pile of unreconciled transactions in order to correct an error you found months after the fact.
Do you need some guidance in setting up a month-end closing process for your business? SIMPLY Financials PLUS can help. We work with businesses on setting up best practice solutions utilizing QuickBooks and other available 3rd party applications. Contact us today at SIMPLY Financials PLUS to learn more about what we can do for your business!