Hiring an Accountant to Clean Up Your Records If you compare the income statements for all periods that your company has been open, this total should match the net profit and retained earnings balance on your balance sheet. They consist of all profits and losses from prior years, plus income or loss for the current year. Retained earnings are an important piece of the balance sheet. Upon reviewing your balance sheets, you should note if the value of your assets appears incorrect. If the company sells or purchases additional assets, other entries must be made. Over or Undervalued AssetsĪ business that owns fixed assets will need to record its depreciation each month. In the end, it will lead to missing income or expenses in your books. These reports may be incorrect if you haven’t accurately recorded a collection, payment, sale, or expense. Incorrect Accounts Payable or Receivable ReportsĪ big part of the accounting process is to check your outstanding accounts payable and accounts receivable for small business reports. If you’re aware of your monthly expenses and they appear to be abnormally high on your income statement, a transaction may have been booked twice or booked to the wrong account. Sometimes business expenses may appear too high. There could have been inventory stolen or sales may not have been recorded in the ledger properly. If you notice differences, something may be wrong. Frequently, companies will perform a physical check of inventory and compare it to accounting records. If your company has inventory, you will need to account for it in your general ledger. If you notice strange variances or differences in your cash or credit card balance, it’s time to check your books for mistakes. You may compare your cash account and lines of credit with your bank statements, take a balance sheet health check, and check your income statement. Hopefully, you review your monthly financial statements for accuracy. If you see any of these signs, it is time to take steps to clean up accounting records. There are several indications that an accounting clean-up may be required. Warning Signs That You Need to Clean Up Your Books You may also save paper copies of documents - just make sure to keep them organized! You should take advantage of this as much as possible. Documentation may include a receipt, invoice, bank statement, or another item, such as a lease.įrequently, accounting software will allow you to upload support for any transactions recorded in your general ledger. What Documentation Should You Have?Īny transaction that involves a purchase, sale, or other financial change should be well-documented. If the IRS decides to audit your business tax return, having an accountant-reviewed set of financials can be very helpful in resolving any issues. Most banks or other commercial lenders require a financial review before providing financing. While most small business owners won’t need to undergo yearly financial reviews, these reviews can provide additional support for financing opportunities. They may perform other accounting activities to assess your level of financial controls in the company. During a financial review or audit, accountants will ask to see documentation of expenses and income. If your company requires a set of reviewed or audited financial statements, you’ll need a clean set of books. ![]() Ensure Compliance for Fiscal Year-End or Financing Opportunities This oversight could lead to a higher tax expense than required or an incorrect tax return. If you don’t have accurate records, you may miss out on deductions or income on your tax returns. No one enjoys tax season (not even accountants), but paying taxes is a required part of keeping your business tax compliant. A virtual bookkeeper can help you automate that and more. You also won’t need to worry about manually tracking expenses. Clean bookkeeping means you don’t have to keep track of the client who is 90 days overdue on their payment or anticipate what your cash flow position will be next week. If you don’t know where you stand with accounts receivable, accounts payable, or cash accounts, you won’t be able to make strategic business decisions. Here are a few: Ensure Financials Are Up-to-Date ![]() There are many reasons to have clean accounting books each month. When and Why You Need to Clean Up Your Books If that is not the case, you will need to take steps to clean up accounting records or use a catch-up bookkeeping service. You may diligently record your accounting transactions or have hired someone to take care of accounting for you. Hopefully, you started your business on the right foot financially. Taking steps to clean up accounting records can be a big undertaking for small business owners.
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