Monday, January 28, 2019

Accounting Check List and Timeline by Ashish Pamula

Like a human fingerprint, every business is unique in its own way. However, one of the common threads that allow every business to survive relies on the maintenance of its accounting processes. Keeping updated records and reviewing that information through the Balance Sheet and Income Statement helps establish the fiscal health of the organization. The business owner will then be able to act on this information and formulate better decisions as to the next steps in the development of the business. The following is a list of bookkeeping responsibilities that the accounting team or business owner should be on top of in order to keep a healthy set of books:

  • Chart of Accounts – Organizing the chart of accounts should be the first thing that is done prior to accounting for anything. The Balance Sheet and Income Statement are both made up of line items that make up your chart of accounts; Balance Sheet including assets and liabilities while the Income Statement includes income and expenses. The business owner along with the accounting team should review each line at the beginning of the year in order to ensure that they will be properly tracking the necessary items against their goals, as changing the chart mid-year can spoil historical information and consistency.

  • Cash on Hand – Knowing how much cash is in the bank account can give you a quick answer on how to plan for upcoming expenses. If checked daily, can also give an idea of the burn rate.
  • Record Daily Transactions – Many organizations lag behind on their daily accounting and are forced to throw together numbers that may not be trustworthy. Recording transactions (bills, invoices, checks, donations, etc.) as they come up is always the best option, and accounting software such as QuickBooks can help streamline the process. Additionally, keeping digital or paper records of all receipts associated with any transaction is also extremely valuable in classifying income or expenses.
  • Review Accounts Payable & Receivables – Any vendors yet to be paid for their services will accumulate in the Accounts Payable schedule while the Accounts Receivable schedule shows invoices that the organization has yet to receive the cash for. Evaluating these schedules will allow the organization to communicate with the vendor/customer on outstanding payment terms and keeping documentation of these transactions eliminates any miscommunications,
  • Process Payroll – Payroll can be handled through a third-party service or by the business owner, but both must be reviewed to ensure that applicable taxes are being withheld at the proper times (federal, state, social security, Medicare, etc.)

  • Reconcile Business Account – Many transactions flow in and out of the bank account on a weekly basis and reconciling the account can assist in catching any erroneous entries. This process is usually done at the end of each month once the bank statements are released but can be done as often as necessary.
  • Review Income Statement vs. Budget – The Income Statement and budget comprise of the same income and expense lines; the statement shows how much was actually earnt and spent for a certain period while the budget shows the planned numbers. Reviewing these two financial statements against each other can emphasize which areas are being over/underspent and need to be revised for the next budget.
  • Review Balance Sheet vs. Prior Period – Assessing the balances of asset and liability accounts against its prior period balances aids in showing how effectively these accounts are being managed. For example, comparing the current balances against the balances from two months ago will display any significant increases and allow the business owner to drill down on irregularities.
  • Compliance – Apart from accounting for payroll taxes and filing yearly tax returns, there are other steps to be taken in order to remain compliant with IRS. At the end of the year, W-2s are needed to report earnings of all full-time employees and 1099s need to be sent to all independent contractors who were compensated more than $600. The business owner should review all filing and tax deadlines, or at the very least connect with an accounting professional who can help prepare a compliance checklist.

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