SANDRA LAZAR
WITH ROSH HASHANAH FAST APPROACHING, WE START TO THINK OF PERSONAL AND BUSINESS RESOLUTIONS THAT WILL IMPROVE OUR QUALITY OF LIFE AND FINANCES.
Now is a great time to ponder and reflect, both on our personal and business resolutions.The bookkeeping resolution for improving the financial awareness and profitability of your business is an excellent goal for the upcoming new year. These 7 bookkeeping resolutions will serve as year-round best practices.
GET YOUR BUSINESS ORGANIZED
Keep complete records of bills, receipts, and invoices to maintain accurate income and expenses for the year to come.
For businesses with significant cash inflows and outflows, accounting software can be very beneficial. Software such as QuickBooks can automatically log and categorize transactions to enable better financial organization. These programs integrate with banks and include invoicing and payment options that can be configured to your individual business needs.
CREATE A FUNCTIONAL CHART OF ACCOUNTS
A clear chart of accounts is crucial for financial reporting. Compile a list of all income, expenses, assets and liability accounts that are used in your business’ financial transactions. Determine which items you’d like to measure when reviewing your business’ performance. Having the chart of accounts set up properly is the basis of all your financial reports.
CLEAN UP ACCOUNTS RECEIVABLES
Another great bookkeeping resolution is to review and stay on top of your business account receivables. Reviewing outstanding receivables will help you determine what can reasonably be collected and what may need to be written off. Having such information at the click of a button will help in the decision of whether you should be extending or denying credit on future transactions.
TRACK INVENTORY
Having an accurate record of your inventory should be an ongoing effort to optimize business operations. Tracking inventory has the following benefits:
- Determine which products sell best.
- Being able to analyze seasonal patterns and trends to enable better decision-making.
- Mitigate loss from fraud (you can’t know what’s missing if you don’t know what you have)
- Eliminate old or obsolete inventory
PERFORM REGULAR BANK RECONCILIATIONS
Ideally, bank reconciliations should be performed monthly or at least every quarter. A busy holiday season and staffing limitations can thwart even the best financial intentions. If scheduled bank reconciliations have been missed, now is the best time to catch up, perform a much-needed reconciliation of cash and credit account balances, and once completed, you can maintain healthy and accurate financial records going forward.
During the reconciliation process, look for errors and account for cash in-transit. Clean up any identified issues immediately to avoid further issues later with reporting.
CONDUCT AN INTERNAL FINANCIAL REVIEW
With accurate financial bookkeeping in place, you can easily review financial reports such as the business’ income statement, balance sheet and statement of cash flows. The reporting will give you the critical information you need to understand where to better focus and how to increase the business’ profit margin.
DEDUCT EXPENSES CORRECTLY
Before filing taxes, it is important to ensure that all expenses incurred in the process of running your business get deducted appropriately.
Keep track of items like cell phone usage, automobile expenses and home office allocations to determine what percentage was for business verses personal purposes.
Exceeding allowable deductions, whether intentionally or unintentionally, can increase the risk of a tax audit. It is recommended that you consult a professional financial expert on what deductions are permitted.
Wishing all the IMAGE readers, a Shanah Tovah, a happy and healthy personal and business new year to come.
Sandra Lazar graduated Brooklyn college in 1995. She has served as a CFO in a variety of businesses for the past 25 years.
