4 actions to ensure your books are accurate

You’ve heard the saying “Garbage In, Garbage Out” which implies that poor quality input will always produce faulty output. A good businessman reviews the balance sheet and income statement every month. They make decisions and adjust plans based on how actual results are tracked against budget. Relying on inaccurate statements could lead you to make the wrong choice.

Maybe your business could handle a spring cleaning. Here are four things you can do to ensure your books are accurate and reliable.

Have an excellent accountant and accountant. It is essential for your business to have an excellent accountant. Don’t try to do it yourself or force a family member to do it if they don’t have the skills or training to keep your records in order. You and your bookkeeper should have access to an accountant who can help you establish sound accounting practices. Use them as a resource when making financial decisions and when you have questions about how to handle unusual or complicated transactions.

There is a cost to having the right people in the right role. But in the case of your bookkeeper and bookkeeper, the cost can be much higher with the wrong person in the role, no matter how much or how little the salary.

Maintain written accounting policies and procedures. Your accounting policies and procedures are the recipe your business will follow to record the dollars and cents of your business activities. This includes things like your chart of accounts, job descriptions, and duties of accounting and recordkeeping staff. Your policies also define how you will account for items such as depreciation, accounts receivable, bad debts, inventory, prepaid insurance, and all other routine transactions. Well-designed and written policies can ensure consistency in your accounting when onboarding staff and transitioning roles.

Procedures should provide checks and balances that ensure that key balance sheet and income statement items are accurate. If you review statements monthly, which we recommend, you will need to ensure that the accounts are accurate each month. Do not wait until the end of the year to prepare the tax return. You make important decisions based on the results shown in your financial statements. You need to be sure that you are getting the real story.

Are your procedures properly designed and documented? Have they been valued by a knowledgeable accountant who understands the nuances of your business and industry? Do you know if your policies and procedures are consistently followed? If you’re not sure, schedule a call with your accountant to discuss.

Separate the tasks to limit the risk of errors… or worse. Don’t put your business at risk by having one person do everything from counting money and checking inventory to recording transactions on the books and checking everything for accuracy . At a minimum, it is highly likely that errors will go undetected. Worse still, intentional misrepresentations that conceal internal theft would go undiscovered.

A better strategy is to separate certain tasks. That is, one person takes care of the money or property, another person records the transactions in the books, and a third person checks that everything is correct and that the accounting procedures are correct. followed. Unfortunately, for many businesses, there simply aren’t enough people to segregate the duties, so we rely on the integrity of one person we trust to take care of the back office. This creates unnecessary risks. Find a way to separate the tasks of asset management, transaction recording, and accuracy verification.

Ensure adequate supervision of record keeping. It’s hard to know that your bookkeeper and accountant are doing everything right when you’re not an accountant yourself. This is one of the most difficult areas to monitor. I believe this is one of the reasons why people prefer to rely on integrity and trust because they don’t know what accountants should do to begin with. An experienced and knowledgeable outside accountant can help by regularly assisting with monthly or quarterly adjustments to the books. Don’t be afraid to ask their opinion on how the accountant is doing. Ask for suggestions on procedures that would ensure accuracy.

I speak with hundreds of franchise owners each year. We talk about best practices, opportunities and obstacles. It seems that every time there are 10 or more companies represented in a room, there is at least one that has been the victim of a theft or embezzlement involving someone who was trusted too much. . Someone who was like family. And, in many cases, someone who does of the family.

Don’t make yourself a victim. Have a solid structure for your accounting processes and ensure that it is followed.

These four things will help you keep your books accurate. Your financial information should also be timely. Your records must be kept up to date. Still.

I have a problem? Get it fixed!

If your accountant cannot produce financial statements within two weeks of the end of the month, make sure to first determine what the problem is and fix it. Also expect your year-end financial statements to be completed shortly after the end of the year. Tell your accountant it’s important and make sure everyone involved is committed to doing what it takes to make it happen.

Barbara Nudes is the President and Founder of Profit Soup, a financial education organization specializing in providing services to franchisors and franchisees to enable them to trust their numbers, focus on their priorities, make better decisions and make more profit. She can be reached at barbara.nuss@profitsoup.com or 206-282-3888.