by Nathan Liao, Founder of the CMA Exam Academy
Are you looking for ways to run your startup better than ever as spring is in full swing? Yes, it is important that you close your office, shred and recycle old customer reports that are no longer needed, and do an inventory check. However, have you thought about your company’s financial health? It is absolutely essential to clean up your company’s finances in the spring and make sure that all of the accounting is correct and up to date.
When you take a closer look at your startup’s bookkeeping, you can think of new ways to cut unnecessary costs, make more profits, and improve your overall financial health. This, in turn, will help you increase the success of your business and ensure that it remains successful over the long term. However, be sure to read these important tips on how to do the spring cleaning and improve your company’s bookkeeping.
Complete journal entries.
As an entrepreneur, you know exactly how important it is to document all of your company’s day-to-day transactions. Accountants use journal entries to post many of these entries. This way you can keep track of your business purchases, sales, customer bills and payrolls and thus get a clear overall picture of the financial situation of your startup. So take the time to meet with your accountant and review / record any outstanding journal entries. By recording lagging entries, you can get more accurate financial information so you can make more informed decisions and better protect yourself from unforeseen financial problems.
Document your receipts.
Do you sometimes take your clients out to dinner to discuss business projects and plans? Do you have to ship products to customers regularly and buy office supplies frequently? If so, make sure that every single receipt is captured and properly documented. In the case of a business audit, proper records and documentation will make the whole process much smoother. Taking the initiative by recording your receipts can save you a lot of unnecessary stress later!
Review the income statement and balance sheet.
It is important to review your company’s income statement and balance sheet to ensure that all entries have been posted correctly. Sometimes we are in a rush and accidentally record transactions on the wrong general ledger account. This mistake can lead to inaccurate closings that can create challenges later in the next tax season. With that in mind, take the time to review your startup’s financial statements to keep all transactions accurate. You cannot skip this step!
Run bank reconciliations every month to keep your company’s finances in order. Conducting bank reconciliations will keep your bank balances in order and ensure that every transaction is considered. As you do so, you may find that you’ve been billed twice for a business purchase, or that you have an outstanding invoice that needs to be paid.
Examine your budget versus actual expenses.
During spring cleaning, analyze your company’s finances against actual spending and take corrective action if there are large discrepancies. You may no longer need monthly subscriptions to certain software platforms, excessive file storage, and other costs that affect your bottom line. Knowing the variances between budget and actual expenses can help you take corrective action in future periods. This, in turn, improves your overall financial decision-making.
Include your monthly financial data.
Close your monthly financials to the last month to properly balance your company’s checkbook. If you are not up-to-date with current financial statements, you are running your business blindly and completely unaware of potential financial problems. Up-to-date financial data provides you and other key decision-makers in your company with relevant information so that you can keep reaching new levels of success.
To summarize everything.
As a startup owner, you need to have a deep understanding of your company’s financial health in order to make the best possible business decisions. So clean up your company’s financials in the spring by completing journal entries, documenting all expense receipts, and reviewing your income statement and balance sheet. Also, be sure to do bank reconciliations, check your budget against actual expenses, and close your monthly financials. By taking all of these steps, you can ensure the long-term growth and prosperity of your business. For startups on a budget, it is recommended to outsource or hire a professional accountant in-house to ensure that all of the above are maintained on a monthly basis.
Nathan Liao is the founder of the CMA Exam Academy, a premier exam exam program for certified management accountants. As a CMA and CMA coach, Nathan coaches accounting and finance professionals in over 80 countries to get their CMA certification in just 8 months. The unique exam framework at the CMA Exam Academy has proven to be key to the outstanding success of its students in realizing their dream of becoming a Certified Management Accountant.