You don’t need to have an extensive accounting and bookkeeping background to run a business, especially since outsourcing your needs is more accessible nowadays. However, you may still want to be able to keep a close eye on your books to keep accountability, here are some simple ways to keep tabs on your books and make sure everything is running smoothly.
1. Run a your profit & loss report on a monthly basis. Many common mistakes are improperly categorizing expenses, so this gives you a chance to review any items that look incorrect – negative balances, huge variances that look off to you, expenses being high, cost of goods unreasonable.
2. Review your balance sheet – look at bank balances and ask yourself: “do these look correct?” do balances look reasonable and have accruals been processed, prepayments etc. Check that your sales tax is correct and returns have been made.
3. Run your AR & AP reports – review to see your aging details, is anything in more than 60/90 days. Are any accounts in a negative?
4. Check to see if you bank reconciliations have been done, are there outstanding items unreconciled for a long period of time (6 months or more)
5. Poor communication – communication is key between you as the business owner and your bookkeeper. This will help kaibosh any major issues early on, make sure you both understand from the beginning that there will be an open channel of communication on a preset basis.
Applying these checks throughout the year will enforce your amenability and loyalty as an owner and reduce the chances of mistakes which will cause issues come tax season or audits. There’s never too much that a boss can do in the way of double checking that things are running smoothly, as long as you have people you can trust to do the job, a check is all that is needed.