Believe it or not, it’s easy to get behind on your bookkeeping. Life gets busy and before you know it you’re struggling to catch up. When you are winding down from your busy season or trying to play catch up on a rainy day, you may be wondering: Where to start? Whether you are trying to review how your jobs performed this year, or trying to evaluate what type of work was profitable for your company, or you may just be trying to catch up enough to be able to file taxes. Whatever the case may be, it’s never too late or too messy to get your finances accurate and on track.
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Let’s start by looking into these 6 areas to see what financial items are needing a clean up.
- Reconciliation: It’s important to check the last time your accounts were reconciled. Reconciliation is the backbone of getting your finances up to date. By having your accounts; bank, credit card and loans reconciled, you are ensuring that you have verified them against your bank statements, thus making it certain that all of your transactions that have hit your accounts have been accounted for. Once you know when your accounts are reconciled through, you can start on the next month to be reconciled.
- Transactions: Now you need to get all your transactions in your financial software. You can either upload them via a CSV file or manually enter them off your bank statement. Be sure to add a vendor/payee and the proper general ledger account to each transaction. Once you have gone through all of your transactions for all your accounts, you can now take a deeper dive into some reports.
- Project budgets: Pull profit and loss statements by customer, or if you are using another project management software, review your budgets to see if your transactions are accounted for against the project. If you feel you are missing bills or receipts against the job go back and retag information to the correct job. This is also a great time to implement an organization system for storing job related bills so you can easily reference them in the future. Such as, using email folders if you get a lot of subcontractor and supplier bills through here, or using a storage system in the cloud such as google drive to help you organize folders by job or vendor.
- Chart of Accounts: One thing you may notice is that you have too many chart of account items, and it’s difficult to look at certain reports because you’re getting lost in the unnecessary detail. If this is the case, it might be time to clean up your chart of accounts, combine some accounts, create some general buckets vs. sub accounts that try to account for every little transaction. Once you have a clean chart of accounts, you will be able to now Investigate deeper into any numbers that don’t seem to be accurate inside those buckets, they may either look too high or too low.
- Cost Codes: Once you have reviewed the steps above, you might realize that your cost codes are not either mapping correctly to the general ledger accounts or you have way too many cost codes that still aren’t giving you an accurate idea of where your project stands. When setting up cost codes it’s important to remember where they need to tie back to when you think of your company reports. For example, you want to make sure when you look at your subcontractor number that all of your subcontractor codes are pushing back into this account. If your cost code list is too long, you will find people are either avoiding coding them because there are too many choices and/or they could be or miscoding them all together.
- Profit and Loss and Balance Sheet Reports: Pulling your financial reports will shed some light on how your company is performing. Review your balance sheet, verify there are no negatives (with maybe a few exceptions) make sure that your liability balances are current so you know what money you still owe. When reviewing your Profit and Loss statement, compare it from month to month to see if there are any large fluctuations or missing costs. For example, if you see a rent charge every month except one, this would flag you to look deeper into this and see if the transaction could be hiding in another account. Reviewing these reports is crucial for you as a business owner to understand where your money is going and what your business is spending money on. It’s a great way to get a pulse check on what it costs you to operate your company on a monthly basis and plan for this in your future estimating.
Once each and all of these pieces of your finances are corrected and updated, your business can move forward and continue to grow with accurate financial reports. Having confidence in your finances is a big win! It’s easy to fall behind, but the first step to moving forward is choosing to fix the problem. If you are having trouble sorting through it on your own, or are finding issues that may require some deeper accounting knowledge, reach out to experts that can handle all of this seamlessly. You can partner with an outsourced team to help you uncover any hidden issues and resolve any outstanding problems. Reach out today and get your company moving forward again!
