12 Feb 6 Steps to Tame your Bookkeeping Monster Now
Understandably, your bookkeeping is ignored with business deals to close, managing your operations, and personal life. Every new item pushes the books further downward, until it finally vanishes. You do remind yourself about bookkeeping clean up. But you just cannot find the time to prioritize it. And what is the final result?
It becomes a giant monster that scares you when the tax season is ahead.
But, to all the business owners: Don’t panic!
We will walk you through the bookkeeping cleanup checklist you form a better strategy for taming your monster.
BOOKKEEPING CLEANUP CHECKLIST
There are many reasons business owners get behind in their books. We get it. You did not go into the business of keeping the books. (unless you are a bookkeeping business) Whatever your reason don’t worry you are not alone. There are actionable steps to get you back on track. To be fair, this requires focus and attention to detail. But if you roll up your sleeves, grab a cup of Joe, and dig in you can finally cross this task off your list.
STEP 1: VERIFY YOUR RETAINED EARNINGS WITH YOUR TAX RETURN
The first but important step in identifying where to begin! Verify your business retained earnings with your tax return.
Doing so will lead you to the identification of problems area. If your retained earnings are not in agreement with your tax returns, it indicates the problem lies in the most recent financial year. You can go ahead with your audit for current year financials without bothering previous records.
However, if the balance does match, your audit might extend to many financial years. Repeat step 1 til you find your starting point.
STEP 2: RECONCILE YOUR CASH ACCOUNTS
Cash in-flows and out-flows mentioned in your books must be in agreement with what is mentioned in your bank account statements. It is essential because it helps you track who you are liable to and who is liable to you! And it helps you understand where your cash is coming from and where it is going.
Similarly, credit card statement reconciliation is also crucial; credit accounts demand a similar reconciliation as cash accounts! Record line of credit interest as an expense, perpetual balance means aggregation is required, and so on
Once you get caught up to speed on this schedule, sit down once a month to make sure you are always up to date with your cash accounts. Eyes on the money is very important for running a successful business!
STEP 3: STATING ASSETS AND DEPRECIATION
Every asset must be stated under the head where it belongs to!
Property, Plants, and Equipment of your business will be capitalized as fixed assets. Other tangible and intangible assets like cash, debtors, goodwill, copyrights, etc., need to be stated correctly according to standards.
Do you have inventory? Better be sure this is up to date as well.
Now that you have your assets laid out you need to make a schedule of depreciation for all your tangible and intangible assets. If you have one already great! Make sure to take the time to fill in the depreciation for each prior month separately. While more tedious than that tempting year end lump sum entry, you could be distorting your financial picture and will be wrestling with that annoying spike in every assessment of your finances going forward.
STEP 4: VERIFICATION OF LOAN BALANCES
You need to verify your loan balances with the financial statements and ensure that loan interest have been recorded correctly in books.
Additionally, if you own several businesses, you need to state intercompany loans. Every business should have separate accounts and activity between them needs to be correctly stated.
STEP 5: PREPARATION OF TRIAL BALANCE
Trial balance is another checkpoint to help you identify discrepancies and erroneous practices in your bookkeeping. If your credit side doesn’t match your debit side by preparing a trial balance, it clearly means some error in posting your business transactions.
STEP 6: MAKING NECESSARY ADJUSTMENT ENTRIES
Sometimes your account balances require few adjusting entries to agree with a real picture of your finances. Companies need to adhere to recognition practices laid out for the type of transaction they have with their clients and vendors. If you are unsure about what journal entries to make this would be a good time to reach out for some help.
There are many great resources online to help those braving the wide accountancy. Investopedia has a wonderful plain language approach to describing the ins and outs of accounting.
Check out their accounting section here.
FOR FOLKS IN THE “NICE LIST BUT I STILL NEED HELP” CATEGORY:
The problem most business owners and entrepreneurs face is not just bringing their books up to date. It is the ongoing maintenance that needs to get done no matter how many other priorities stack up on your list.
So here is our take:
With the bookkeeping cleanup services charging from 115$ per hour and more, you might end up just putting off this job for the foreseeable future. And that future for when you need to get it done is unfortunately foreseeable…
Since tax season is nigh, and your books must be in shape, PeachBPO wants to help you!
If you want your tax professional to utter ‘HALLELUJAH’ by looking at your books without you shedding a single tear over the cost to get them in that shape, keep reading!
At PeachBPO, we strive to help our clients achieve bookkeeping serenity. You can get your books cleaned, neat, and caught up-to-date with our cost-effective solution. How cost-effective? We typically come 70-80% under quoted rates.
We bring our project management capabilities to all our jobs. We provide you a project timeline, so you will know exactly what to expect and when! Also instead of making you run between us and your tax professional, we work directly with them if you so choose.
Additionally, if you sign up for our monthly services, we can cut you a break on your book’s catchup and cleanup!
Once again, we want to console all the entrepreneurs and business owners. You are not alone in facing the issue of keeping your books up to date. But, you can break the cycle!
Set up a call with our consultants to get the cost effective help you need!
Make sure to share your feedback that how the checklist helped you in aligning your bookkeeping cleanup strategy!
Contact us to get started on setting up your team with PeachBPO!
About Michael Howard
Prior to founding PeachBPO, Michael (or Mike) worked as a business leader in finance and analytics for 14 years. Michael started his career as an economist for the North American cement industry and has since worked as a marketing, strategy, and pricing consultant, FP&A director and most recently the CFO of an international tech start up closely partnered with Google. Michael, attended Loyola University Chicago for his Bachelor of Business Administration and Northwestern as a graduate student in Predictive Analytics.