Are You Doing a Mid-Year Checkup on Your Accounting? You Should and Here is Why.
Many businesses use the calendar year, January through December, as their fiscal year. Yet other businesses create their own fiscal years, like November through October. No matter what your fiscal year is, it is important to take a hard look at your financial records at the 6 month mark, or mid-year. This is a great way to make sure your company is financially healthy and headed in the direction you want it to.
As a business owner, you may often hear that you need to look at your Financials (Profit & Loss / Balance Sheet) on a monthly, quarterly and yearly basis, which is a necessity. However, there is more to looking over your accounting records and evaluating the financial health of your company then just taking a peak at your Financials. In the busy day to day of running a business, entrepreneurs, may forget to look deeper into their accounting record and that can allow small problems to become large ones.
Here are 5 important areas to take a closer look at:
1) Business, corporate and payroll tax: depending on the size of your business, income, payroll and what type of business you run, you probably pay taxes either monthly or quarterly. Taxes for business and payroll vary widely. A 6th month check up is a great time to see if you are on target with your tax payments and make any adjustments necessary to stay on track so you don't owe big at the end of the year. Payroll taxes are due every quarter. Taking an in-depth look at them and running some calculations will make sure there are no surprises.
2) Accounts Receivable: Cash flow is important in a business. If your invoices are set for 30 day payment, you don't want to wait 60 to 90 days (or longer) to receive payment. Evaluating your AR can make you aware what customers are paying and which ones need more attention so you can receive payments on time.
3) Accounts Payable: Most of your vendors will remind you if you miss a payment. However, every once in a while, your vendor may not realize you missed a payment. Taking a deeper look and making sure all payable's are clean and paid on time is just good business.
4) Asset Register: Besides bank accounts, assets may not change as often as other bookkeeping accounts, but they still can change from time to time. The purchase of equipment or company a vehicle - the sale of such items will change your Asset Register. A six month check up is a great way to make sure your company is current with this register.
5) Long-Term Liabilities: Your Long-Term Liabilities can be vehicle loans, equipment loans, or any other loan that would take more than a year to pay off. It is a great idea to look at the amortization schedule on your long-term loans to see if any adjustments need to be made. (Note: Credit Cards are not usually considered long-term loans.)
These are suggestions on areas all business owners should look deeper into at the minimum of every six months. Some areas listed above should be evaluated even more often.
Even if you have a great bookkeeper or CPA who is taking care of these areas and your daily bookkeeping, it is always a great idea for the owner of the business, to be in the know of what their accounting books look like.
The financial health of your business is at your fingertips. Use that information for your benefit.
Here is to your success!
RH Business Solutions