Founders shouldn’t be Accountants or Bookkeepers. But you’re ultimately responsible for ensuring your financial records are correct. Here are some simple ways to keep tabs on your books without taking an accounting degree.
1. Pull a monthly income statement report
Do this on a monthly basis, and make sure the report gives a monthly breakdown over the last several months. Look for negative balances, large changes month-to-month, expenses being high, cost of goods unreasonable. Are there any uncategorized expenses?
2. Check your balance
Pull a Balance Sheet report. Look at bank balances and compare to your bank statement. Do the numbers look reasonable? Do you see prepayments and deferrals? What about balances owing for sales taxes, etc.?
3. Check your AR & AP reports
Review to see your accounts receivable aging details, is anything in more than 60/90 days? Are there any payables in the negative?
4. Bank Reconciliations
Look in your accounting software for the ‘banking’ or ‘bank reconciliation’ section/function. Are there outstanding accounts unreconciled for a long period of time (6 months or more)?
5. Ask questions, get answers
Make sure you have at least a monthly meeting with your bookkeeper. Review the reports and ask questions. on a preset basis.
Above all, stay engaged with your financials. This usually starts with Founders being interested in tracking KPI from real financial data, and producing forecasts based on actuals. That’s when you truly see the value of accurate data.