When was the last time you checked the temperature of your business? If it’s been a while, we suggest you take the temperature of your business now. A bookkeeping check-up is recommended. And, your financials may require attention.
Half of the year has passed. (I know. I can’t believe it either!) As we move further into Q3, it’s important to conduct a mid-year review so you can track your progress, identify deficiencies, and adjust spending as required. Take a close look at your financials and give your books a comprehensive bookkeeping check-up.
Here are a few key items to examine under the microscope during your bookkeeping check-up.
While many business expenses are tax-deductible (which means you could get money back from the government), this only happens when you have the proper documentation. Take a close look at how your expenses are coded and make sure you have any relevant receipts attached to the transactions in your bookkeeping software.
Now is the perfect time to get into the habit of monthly reconciliations, and not simply reconciling your bank statements against the feeds in QuickBooks. You’ll want to reconcile your bank and credit card accounts, as well as any additional asset, liability, and equity accounts. It’s important to compare your internal records against your monthly statements from external sources. Even the best banks make mistakes, and computers are only as good as the people that enter the information. Monthly reconciliation will help you:
- Catch any accounting errors before they become a big problem,
- Keep your payables and receivables from surprising you, and even
- Help you identify potential cash savings.
How much money do you have on hand? Having a positive cash flow is a great indicator of your business’s financial health. Your cash flow statement, a financial statement that summarizes information about the cash inflows (receipts) and cash outflows (payments) for any specific period, also helps monitor how your business moves money around. It tracks operating, investing, and financing activities to show where you are bringing in cash, and where you’re spending it. This valuable insight can help you manage your finances and make sound business decisions. It is also one of the key indicators of how well you are doing against your yearly budget. With a proper cash flow forecast, you can compare business expenses and income for specific periods and estimate the effects of future business changes. You can basically predict cash shortages – and better yet – cash surpluses.
Year-Over-Year (YoY) Reports
One of the best reports you can run at the end of any quarter is a year-over-year (YOY) comparison. If you haven’t done this before, now is an excellent time to start. In doing so, you may see some significant discrepancies that stick out. If you notice a drop in figures from this year compared to last year, then now is the time to analyze and identify the underlying issue to get your business back on track. Even if you see some impressive growth, defining the cause for your spike in numbers now may help you improve even more during the next two quarters of the year.
Profit and Loss
If your revenues are greater than your expenses, your P&L statement will show a net profit. Otherwise, a net loss is shown. If it looks like your expenses will exceed your income this year, you can likely use that net loss for tax purposes. If your profits look like they will be higher, you might consider a major purchase that can be depreciated to offset the win on your taxes. Once you run a quality P&L (also called an income statement), we suggest talking with your CPA to find a strategy that will work best for your business.
If this bookkeeping check-up, reporting, and analysis seem daunting, and you don’t want to do all this for yourself, we understand. An annual physical always makes me a bit apprehensive, too. We have your back! Give us a call or drop us an email before Q3 is over, and we’ll help you sort it all out.