Even if you hire someone to do your accounting and bookkeeping, there are a number of items that you should do periodically. Many small businesses have suffered serious losses when the owner didn't check the books regularly and the trusted bookkeeper pocketed a substantial amount of the business earnings. The following checklist will help you keep in touch with your business and, perhaps, even prevent serious financial problems.
Compare Actual Income and Expenses to the Budgeted Amounts
Every month you should compare your income and expenses to your budget. This review is a great way to learn what's working and what's not working with your business. The goal is for you to have a thorough knowledge of what is happening and to be aware of anything unexpected that is happening so that you can adjust your actions in a timely manner.
Scan the Check Register
Periodically you should take a look at the check register just to make certain all the payees are familiar to you. Multiple checks written around the same time to the same vendor is one indication that funds are being diverted. The check register can also give you a sense of the flow of your funds.
Review the Bank Reconciliation
Checking the bank reconciliation is important, particularly if you have one person doing all the bookkeeping: writing checks, posting entries, and preparing financials. Look for any adjustments to the bank accounts and stale items.
Review Statements from Vendors
Take the time occasionally to open the mail and look at statements from vendors. You want to make certain that your business is in good standing with vendors. Overdue invoices that you were not aware of might be an indication that your bookkeeper is not handling your payments appropriately.
Review the Payroll Register and Hand Out the Paychecks
Not only do you keep on top of who is being paid what, but it give you an opportunity for personal interaction with each of your employees. Done well, it can be a great morale booster. Also, it can help you keep an eye out for padding the payroll which can be a problem in industries where it is common for the crew to go straight to the jobsite and perhaps not come into regular contact with the owner. Construction and cleaning services are businesses that particularly need to watch for payroll padding because owners frequently do not have constant oversight of their employees.
Review your Accounts Receivable and Aging Accounts
You need to know if you have any slow paying customers. A periodic review also will uncover any misapplication of customer payments.
Take a Physical Inventory.
Many small businesses have inadequate inventory records, so if you have a large amount of inventory or a high volume business, you should work with your accountant to set up some type of perpetual inventory system. There are also some excellent software packages available for the small business that can make this process relatively painless. Once you have a system in place, you should take a physical inventory at least once a year, comparing the actual goods on hand to the inventory records.