đ§ Do Your Numbers Look Right to You?
Steps to take control of your bookkeeping and create a process for monthly close and reconciliation of accounts.
Itâs the end of the month, and you have no idea if your financial reports are correct or showing the right numbers. If youâre asking yourself, is this right?! đ§ Then, you need to create a process to make sure all accounts and transactions are categorized and reconciled on a monthly basis. So, how do you build confidence in the numbers your accounting system is showing you?
When Iâve shown clients how to do their bookkeeping, I try to keep the process simple and something that doesnât take over their time or brain space. Itâs not a good look for me if the client walks out overwhelmed.
Steps to take control of your bookkeeping:
One day each week to categorize for 1 hour
First week of the month to finalize reconciliation
Second week of the month to review financial reports
One Day Each Week
One hour each week to be on top of your transactions. If you keep this time sacred and focus for 45 minutes to 1 hour to ensure the weekly transactions are categorized, then it wonât feel so overwhelming by the end of the month. Iâve worked for companies that had 100s of transactions each month, and when I didnât stick to this rule, I spent days at the end of each month catching up. It didnât feel good, and I donât wish the experience on anyone. So, do yourself a favor and keep this hour each week. Your future self will thank you.
First Week of the Month
Once youâve finished categorizing your transactions, youâll use the first week of the month to reconcile your accounts for the previous month. Reconciliation is where you make sure your accounting system matches your statements. Ending balances for the account in your accounting system should match ending balances from your account statements. Sometimes, there may be differences due to the timing of the ending date, but it shouldnât be massive. Reconciliation ensures every account on your balance sheet statement is correct, and you can defend the numbers shown.
Second Week of the Month
The second week of the month is when you can review your financial reports with yourself or your team. Your numbers finally look right to you, and you know itâs right, so the next steps are to analyze your numbers to see if you spent too much on expenses, made enough sales, or have enough cash flow. This is where the fun begins, and you can use your numbers to plan for the next month or quarter.
Depending on how many transactions you have in a month, you can definitely truncate the steps and combine your reconciliation and financial review weeks into one. Having a repeatable process will make sure youâre confident in the numbers your reports show. If you start as a one-person team, this process makes sure that you can transition the work to another employee week by week until they can do it.
đ The next post will be about the most common taxes and filings necessary for a business.
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Woolichooks provides finance consulting services, which include setting up finance software systems and processes to enable companies to scale for growth.