Closing your books every month is an essential part of running a business. Why? It regularly shows you your business’s financial information, explains what areas need to be improved upon, and is all around a great practice to stay in line with financial honesty and accountability. It can also help you make decisions about future business ventures, prevents expensive mistakes, and helps prepare you for tax season.
Now, what is the process of updating your books every month?
- You’ll want to always record your incoming cash. Comparing invoices with your records is essential in making sure you aren’t missing any customer payments. Make sure you are sending an invoice to every customer you completed work for during the month. If you find anything out of the ordinary, you should fix them right away.
- Update your accounts payable. If you don’t have time to record transactions every day, make sure you write down your purchases and organize receipts. That way, you can keep your accounts payable updated for your monthly close.
- Record all of the receipts and records for items you purchased using petty cash. Make sure your records match the balance of your petty cash fund. If it does not, chances are you are missing a transaction and need to investigate.
- During your month-end close process, you need to reconcile all of your accounts. To do this, match your records to your account statements from outside entries. Make sure your records for the month are accurate by performing a bank statement reconciliation.
- Review your fixed assets such as buildings, equipment, furniture, vehicles, and land. Your fixed assets generally do not convert into cash and they can depreciate in value over time. When closing your books at the end of the month, record any payments related to your fixed assets.
- Counting your inventory monthly allows you to accurately record inventory levels in your books at month-end. This can help you decide what items you need to replenish and how frequently every month.
- Check your revenue and expenses by reviewing your revenue and expense accounts to confirm they are accurate.
- Review information before you close the month and consider having a second set of eyes review your work. The person reviewing your accounting information like a bookkeeper and accountant. If you do not have a second set of eyes, be sure triple check your own work to ensure the information is accurate.
- Lastly, you should get ready for the next month. Keep on top of your monthly accounting responsibilities and create a monthly financial calendar. This calendar can help you prepare for closing your books for the next month and can help you avoid falling behind.
In a nutshell, closing your books every month backs you up in case of an audit, keeps your financial statements and books accurate, makes tax filing easy, gives you a clear view of your business’s financial situation, prepares you for future endeavors, and prevents future accounting mistakes.
Need a way to update your books every month? You’ve come to the right place. Southern Payroll & Benefits helps dozens of small businesses with their bookkeeping and accounting needs. We’re always ready to help you. We are the small business for small businesses. Feel free to contact us, stop by our office, or visit our website to learn more!
Businesses in Chattanooga, TN, trust Southern Payroll & Benefits with a variety of outsourced HR services, from payroll, to insurance benefits, and tax processing. We partner with you to insure your comfort and to advise on best-practices and compliance requirements. Southern Payroll offers one-month free payroll to all clients, along with no annual contracts, to make sure that we exceed expectations daily. We are also extremely proud of our 2% initiative, in which 2% of all payroll proceeds will be donated to the 501(c)3 approved charity of each client’s choosing. For more information about how we can help your business, schedule a meeting or call (423) 207-2497 today.