Businesses that hold preparing their financial reports till the end of the year are likely to find it to be a time-consuming and difficult undertaking. But making it easy, many of the owners will prepare their monthly financial statements to get an ongoing view of their financials and make the year ending process stress free and smoother.
The month end process will be like collecting necessary financial information to review and reconcile the records at end of every month. It helps in keeping accurate records and identify any difference well before year close. If you keep a checklist to make sure everything has been taken care of that has to be taken care of. But what exactly is covered by this list? What must you keep an eye on? We’ve got your back, so don’t worry!
Here is a quick Monthly Bookkeeping Checklist to help ensure that you do not fall behind on your books.
- Recheck Cash Position
- Update Your Bookkeeping Software
- Record Revenue and Expenses
- Review Customer and Vendor Invoices
- Reconcile Your Records
- Sales Tax Returns
- Review Your Inventory
- Record Credit Cards Transactions
- Review Debt Accounts
- Review WIP Reports
Recheck Cash Position
Keeping track of your cash position is crucial for any business to maintain financial stability and avoid unnecessary trouble. It’s essential to have a clear understanding of your cash inflows and outflows to make informed decisions. To avoid any financial discrepancies, it’s necessary to review your cash status regularly. At the end of each month, you should review your cash balance, bills paid in cash, payments received in cash, and other related transactions. This will help you to analyze your business’s financial position for that particular month and make adjustments accordingly. By keeping track of your cash position, you can identify any discrepancies in your finances and take corrective action before it’s too late. This could include reducing expenses, increasing revenue, or re-evaluating your budget.
Update Your Bookkeeping Software
You are absolutely right that bookkeeping software plays a vital role in the bookkeeping process. It’s essential to have a reliable and up-to-date bookkeeping software that aligns with your business needs. Having the latest version of your bookkeeping software is important because it ensures that you have access to the latest features, bug fixes, and security updates. It also helps to ensure that your bookkeeping software is compatible with other software and systems that you use in your business. Upgrading or changing your bookkeeping software may require some initial investment and time to learn the new system, but it can pay off in the long run by improving your bookkeeping accuracy and efficiency, and ultimately saving you time and money.
Record Revenue and Expenses
By recording your revenue and expenses every month, you can keep track of your cash flow, identify trends, and detect any discrepancies. You can also use this information to create a budget, track your progress towards your financial goals, and make adjustments as needed. Furthermore, having frequent insight into your spending can help you identify and reduce unnecessary expenses. This can help you save money and increase your profits over time. Similarly, having data regarding your revenue generated every month can help you identify areas where you can expand your revenue. This can help you grow your business and increase your profitability. In summary, recording your revenue and expenses every month is a crucial step in bookkeeping. It provides valuable insights into the financial health of your business, helps you make informed decisions, and can help you reduce unnecessary expenses and expand your revenue.
Review Customer and Vendor Invoices
By organizing your invoices, you can keep track of your monthly expenses and identify trends in your cash flow. This can help you make informed decisions about your spending and better manage your business’s finances. Tracking your vendor invoices can also help you understand your supply chain and identify areas where you may be able to negotiate better prices or terms with your vendors. Similarly, tracking your customer invoices can help you identify trends in your sales and revenue and develop strategies to increase sales and profitability. Moreover, keeping track of your invoices can also help you avoid missing payments or making late payments, which can lead to additional fees and harm your business’s reputation.
Reconcile Your Records
A bank reconciliation statement summarizes the bank and business activities and helps to identify any discrepancies between the two. This can include items such as outstanding checks, deposits in transit, or bank fees. By reconciling the bank statement with the business’s records, businesses can ensure that all transactions have been properly recorded and that their financial records are accurate. Moreover, reconciling bank statements on a monthly basis helps to reduce the risk of fraud or misuse related to business finances. This is because it allows business owners to identify any unauthorized transactions or discrepancies early on and take action to address them.
Sales Tax Returns
Sales tax is an inevitable part of running a business and it is important to keep accurate records of sales tax collected and paid. Recording and preparing sales tax on a monthly basis is a good practice that can help businesses avoid unnecessary issues and errors. Piling up the workload and trying to do sales tax on a quarterly or yearly basis can lead to confusion and errors, which can have serious consequences. For example, if a business underpays or overpays sales tax, they may be subject to penalties or fines. By recording and preparing sales tax on a monthly basis, businesses can ensure that they are accurately collecting and remitting sales tax. This can help them avoid any issues with tax authorities and maintain a positive reputation with their customers.
Review Your Inventory
Frequent inventory reviews are crucial because they enable organisations to spot and address possible problems like supply shortages or overstocking. Stock shortages can result in missed sales and strained customer relationships, while overstocking can divert important resources and raise storage expenses. Businesses can discover patterns in client demand and modify their inventory levels by conducting regular inventory checks. In conclusion, it is crucial for business owners to periodically examine their company’s inventory to make sure they have the correct quantity of stock on hand to satisfy client demand while limiting inventory expenditures.
Record Credit Cards Transactions
It is easier to keep accurate records of business activities and avoid confusion or mistakes in financial reporting by keeping personal and business transactions separate. It is simpler to track and reconcile business costs, submit tax returns, and evaluate financial performance when business and personal transactions are kept apart. In addition to making it more difficult to claim company deductions on tax returns, mixing personal and business costs can also result in penalties and interest charges. Businesses can open a second credit card account that is used only for company spending in order to record credit card transactions separately. This will enable you to track and reconcile any business-related credit card purchases independently from personal ones. Also, businesses can save receipts and invoices for all credit card transactions and classify them in accordance with their business purpose.
Review Debt Accounts
To efficiently manage a company’s finances, accounts payable and receivable reports must be regularly reviewed. It assists business owners to manage their cash flow effectively by assisting them in staying informed about their present financial situation. Business owners can make sure they are aware of any unpaid bills or other obligations by reading accounts payable reports. This aids them in setting expenditure priorities and preventing late payment fees. Also, business owners can keep track of any unpaid invoices from clients by analysing accounts receivable data. This makes it easier for them to follow up on past-due payments and take the necessary steps to recover the money owing.
Review WIP Reports
The term “work in progress,” or “WIP,” refers to tasks or projects that have not yet been completed. WIP can refer to products that are only partially finished, services that are still being provided, or ongoing but unfinished projects. To make sure they are on course to achieve their goals and objectives, firms must routinely examine their WIP. Business owners can take corrective action to guarantee that jobs and projects are finished on time by frequently evaluating WIP to spot any bottlenecks or problems that might be hindering their completion. It’s a good idea for firms to review their WIP on a regular basis to keep on track and make sure they are progressing towards their goals.
The Monthly Bookkeeping Checklist ends here. We hope you find these steps useful and try to execute them the best you can. Every business has its own way of functioning, but these are some common methods that everyone can adopt. We hope you use these to ease your workload. Happy Bookkeeping!