The year is wrapping up, and a fresh new slate awaits. Take some time now to shed the accounting and financial garbage you don’t need dragging you down come January.
Here are this year’s top clean-up tips for streamlining financials and fostering clearer scorekeeping.
Tip 1. Sit side by side with every person in your office who enters data. You will probably discover:
- redundant entries;
- entry fields that populate reports that no one ever looks at;
- too much detail in the notes section; and
- not enough information in the essential fields.
Tip 2. Establish a blame-free approach to cutting out any unnecessary steps.
Ask team members: What do we do that you think may be a waste of your time and my time? What are we not doing that we may be well served to start doing or restart doing? You can learn so much by asking those questions.
Tip 3. Write or update your procedures for basic income and outgoing statements.
The procedures listed below encompass 80 to 90 percent of all accounting and are often where the bottlenecks develop:
- entering customer invoices;
- applying customer payments;
- making deposits;
- entering bills;
- paying bills;
- entering credit card charges;
- paying the credit card statement; and
- entering the payroll journal entry.
Keep the systems simple enough to be current at least once every week with all the entries.
Tip 4. Have the people who enter the data write or edit the procedures manual.
Then, you can review and make edits and updates. It’s even easier when two people work together. One does the entry; the other writes down the procedure.
Tip 5. Route “fixes” through the income statement.
As you and your certified public accountant nail down the account balances, make adjustments as needed via an income or a cost account.
The income statement starts over every year. The balance sheet’s ending balances are the beginning balances for the next year.
Clean up the balance sheet accounts as you wrap up each year, and send the “fix” through the income statement. The adjusting entry will impact profit, which is the link between the balance sheet and the income statement.
Leave clues in the memo and description line of your entries that will help you remember what you did and why you did it.
Tip 6. Get rid of excess accounts.
Could you lump all phone expenses, for example, into one account? Sure, because you can always review the transaction register for details or can take a look in the phone folder in the file cabinet.
Tip 7. Commit to a monthly review of the financials with a fine-tooth comb.
Go line by line down the balance sheet and income statement (profit and loss), ask all the necessary questions and drill down on the associated transactions for each account. It’s your money and your responsibility. Pay attention.
This is my challenge to you. Simplify your scorekeeping. Get current on your reporting. Move into the next year without this year’s accounting baggage.
That leaves you and your team free and clear to go and to grow.
Ellen Rohr is an author and business consultant who offers systems for getting focused and organized, making money and having fun in business. Her books include “Where Did the Money Go?” and “The Bare Bones Weekend Biz Plan.” She can be reached at ellen@barebonesbiz.com.
