Do you often wonder why your accounting records are a mess? Let us delve into a few aspects not to admonish you for financial illiteracy or placing trust in others. It would help you instill a discipline to ensure that you have great accounting records. It should form the basis of all the best stuff such as planning for your future and counting all money you made.
Over the years, you may have come across that businesses have started by all kinds of individuals, but they generally fall into the following three categories –
- The serial entrepreneur of the one who had recently started, running, and selling business
- The salesperson who is good at selling anything and fell into an opportunity
- The practitioner who is good at a specific craft and went out independently
It would not be wrong to suggest that these three kinds of people would not have strong finance and accounting backgrounds. They would also not have any desire to acquire these skills. Therefore, they would trust other people who might not know what they are doing.
Use the following Bookkeeping Cleanup Checklist when evaluating the performance of your accounting support and consider getting some help from outside, especially when you keep your books independently. It would also help you access free government money of PPP or EIDL loans with proper bookkeeping and updated tax returns.
In Order to access the government economic stimulus programs PPP or EIDL Loans, you must have proper bookkeeping as well as up-to-date tax returns in order to meet the application requirements. If you do not have your bookkeeping in order, here is a checklist to help you clean your books in 9 steps
- Do retained earnings agree with your tax returns? Do you have a precise understanding of why it is important for you? Rest assured that you do not have a good starting point if it is not right.
- Cash accounts would reconcile and agree with bank statements. It would not reconcile or investigate such items.
- The fixed assets would be capitalized appropriately. It implies that you should look for accounts in your profit and loss for lease payments along with other purchases that should be capitalized.
- State other assets appropriately. It implies if you have an asset account that has not changed. You should also look into whether or not it is realistic. Consider determining inventory what you should have in stock at cost.
- Reconcile the credit cards.
- Unrelated party loans that agree to interests and statements should be booked appropriately.
- Any related party loan should agree on both sets of accounting records. However, if you own more than one company and loan money back and forth, you would require both sets of accounting records.
- There should be no negative liabilities and negative assets.
- If you have an accurate balance sheet, consider reviewing your profit and loss statement. Are your expenses within the tolerable thresholds related to earlier periods and previous years?
If you do all this, consider having good data to help you make informed decisions. When asked, it would ensure that you could produce financials for the interested parties at a moment’s notice.
It would not be wrong to suggest that this aforementioned bookkeeping checklist would be helpful to let you sleep easy at night knowing that you have done what you were required to do for keeping your books updated without any hassles.