Even if you
hire someone to do your accounting and bookkeeping, there are a number
of items that that you as the business owner should do periodically.
Many small businesses have suffered serious losses when the owner
lost track of the numbers and the trusted bookkeeper "borrowed
money" and left for an extended cruise. The following checklist
will keep you in touch with your business, and perhaps even prevent
you from serious losses.
actual results to budget.
Each and every month you need to compare your income and expenses
to your budget. This review is perhaps one of the most important
tools for a small business owner. It's a great way to learn what's
working and what's not working with your business. The goal is not
to have an accurate budget... but for you to have a thorough knowledge
of what is happening and to know if anything unexpected is happening
so that you can adjust your actions in a timely manner.
- Scan the check
Periodically (say every 3-4 months) you should take a look at the
check register just to make sure all the payees are familiar to
you. Multiple checks written around the same time to the same vendor
could be an indication that funds are being diverted. (You also
might want to reduce the time spent writing and posting multiple
- Review the
This should be done on a monthly basis (or if you skip a month take
a look at all the reconciliations since your last review.) This
step is important, particularly if you have one person doing all
the bookkeeping: writing checks, posting entries, preparing financials,
etc. Look at any adjustments to the bank accounts, stale items,
- Look at canceled
Occasionally (say 1-2 times a year) pull out a bank statement and
flip through the canceled checks making sure that all those signatures
are yours, that you recognize the vendors and scan the endorsements
on the back. Obviously, this can't be done if you don't get your
canceled checks back from the bank. In this case you might want
to spend a little extra time with the check register.
- Review statements
from vendors. Every now and then (say 3-4 times per year)
take the time to open the mail and look at statements from vendors
(many vendors have stopped sending statements, but they will send
late notices). Here you want to make sure that your business is
in good standing with vendors -- long overdue invoices might be
an indication that a check you thought was going to a vendor actually
went in someone else's pocket, or that an invoice has been overlooked.
- Review Payroll
register and handout the paychecks.
Now of course this isn't an issue for a business with only 1-2 employees.
But "padding the payroll" is a common problem in some
industries -- such as construction or cleaning services where it
is common for the crew to go straight to the jobsite and perhaps
not come into regular contact with the owner.
- Review your
Accounts Receivable and Aging. This needs to be done on
a regular basis. Of course you need to know if you have any slow
paying customers and a periodic review would also disclose any scheme
of "misapplying" customer payments.
- Take a physical
inventory. Many small businesses have very poor inventory
records, so if you have a large amount of inventory or a high volume
business, you probably will want to work with your accountant and
get some type of perpetual inventory system set up. Again, NolaPro
is an excellent software packages available for all sized businesses
that will make this process relatively painless. Once you have a
system in place, you should take a physical inventory at least once
a year and compare the actual goods on hand to the inventory records.