You started a business. Things are going well and you are actually making some money. You have been doing all of the bookkeeping yourself but you really do not know if things have been done properly. How do you know if your bookkeeping is right? What can you look at to see if your books are done correctly?
There are three common areas we look at first to determine if the bookkeeping is accurate:
- Bank reconciliations
- Reviewing unpaid invoices and unpaid bills
- Reviewing reports
How can examining these areas help you?
Knowing that your books are accurate can make you feel good about the information you are providing to others and help you make better decisions.
Start by reconciling your bank accounts
Cash is one of the most important pieces of your bookkeeping. Making sure your bank balances are correct is the best place to begin.
Most accounting software solutions, such as QuickBooks Online (QBO), have a reconciliation feature built-in. You should do the bank reconciliations for each account every month. Bank feeds can make entering your transactions easier but they are not the same as, or a replacement of, bank reconciliations.
What if you have not reconciled your bank statements. What can you do?
- Go back to the first month that you opened your business bank account to begin your reconciliation
- The first bank statement should have a beginning balance of zero
- Reconcile the months in order
- Review uncleared deposits and payments
Bank reconciliations can get you off to a great start. What else should you look at?
Review your unpaid invoices and bills
The next most common areas that can affect your bookkeeping are your invoices and bills.
Take a look at your outstanding (or unpaid) invoices:
- Are there any old invoices showing as still being owed to you?
- Do the balances seem right?
- Are there overpayments or credit customer balances?
Take a look at your outstanding (or unpaid) bills:
- Are there any old bills that are showing as still being owed?
- Do the balances seem correct?
- Are there any credit vendor balances or open bill credits?
Having old unpaid invoices and bills on your books can be another indicator that your books are not correct.
Review your reports
We ask our clients if the numbers on their reports make sense. For example, if you have been having trouble with cash flow but your profit and loss shows that you have made a huge profit, there may be something recorded improperly.
Many business owners tend to look more often at their profit and loss. Often they do not pay too much attention to their balance sheet. However, if your balance sheet is wrong, then most likely your profit and loss is wrong too. So reviewing both reports is essential.
Read more about the warning signs that your reports might be inaccurate here.
Get professional help
You have been doing all of the bookkeeping yourself but you really do not know for sure if things have been done properly. What can you do? You can get a professional bookkeeper to review your books for accuracy.
When new clients come to us, the first thing we do is a checkup. The new client gives us access to their existing accounting records. We review the bank balances, invoices, bills, other transaction details, and their reports. From here we can determine any trouble areas and develop a plan to correct them. Once the problem areas are identified, we provide our recommendations to clean up the books.
Most business owners feel more confident when a professional takes charge of cleaning up the books. The end results are books that are accurate and reports that tell the true story of where the business is at.
Heard enough and interested in learning more about our checkup service? Visit our Services Page for more information.