5 accounting tricks to check your accounting management
Cofinia has been supporting SMEs in business management and accounting management since 2016. Many clients have approached us to help them update their business accounting, knowing that there was a problem. However, in several other cases, we had to notify the client of shortcomings and problems that we observed when they entrusted us with a bookkeeping or system migration mandate.
Here are 5 accounting tips to check if your accounting is in order:
1. Are your bank and credit card reconciliations done?
Bookkeeping may seem routine to some people, but it comes with its own set of challenges. Too often, we find that the bank reconciliation is not carried out. Especially since with accounting software like Zoho Books and Quickbooks that synchronize with your bank accounts and regardless of the transactions, it is easy to consider these reconciliations as a proper reconciliation.
2. Are your taxes properly configured and the tax reports properly executed?
It is not enough to have rates of 5% for the GST and 9.975% for the QST, you also have to know when to use them. For example, do you apply a 50% reduction on these taxes for entertainment costs? What is the frequency of your tax reports? Are the revenues declared for the period identical to the revenues invoiced? Have you taken into account any transactions or corrections recorded on a date prior to your last report?
3. Do balance sheet items include amounts that have not changed for more than one fiscal year?
This might be normal for share capital, but this is not the case for prepaid or accrued expenses. Too often, amounts are posted to these accounts but not processed correctly afterwards. Prepaid fees should normally reduce periodically. For example, when paying an annual insurance premium, we will put 11/12 of the amount in prepaid expenses in the period and this will reduce the amount periodically each month.
For accrued expenses, it often happens to record, for example, a bonus provision or an expense for an invoice that will be received in a later period. Often, when the time comes to process the invoice or the disbursement of the bonus, the expense account is applied a second time instead of reducing the accrued charge. It may be a simple oversight, but one that will skew the company’s results.
4. Do your financial results fluctuate a lot each month?
I really like looking at a comparative income statement . I compare it month by month since the beginning of the year or I compare the current month to the same month of the previous year if the company has cyclical operations.
I analyze the variations for each line of income or expense. Often, the expense amounts are higher in certain months, indicating to me that the accounting treatment is not appropriate. We often see this case in equipment costs. We sometimes forget to recognize a fixed asset when buying a computer.
One of the accounting principles is to pass an expense in connection with the life of an asset. This is how depreciation should be calculated. This way of analyzing the results will also make it possible to detect errors of double entry.
5. Have year-end entries been accounted for?
At the end of the year, you send your information to your accountant to file your tax returns and sometimes a notice to reader or a review engagement. The accountant will certainly have to make adjustments, for example, reclassifications, non-current transactions such as disposals of assets, but also the calculation of depreciation and taxes.
These entries are generally sent by your accountant at the same time as the financial statements. These entries must be recorded in your accounting system so that your beginning of year balances on the balance sheet are accurate.
Here’s a 6th bonus tip!
6. Do you have unapplied credit notes on your customer and supplier invoices?
In many cases, suppliers issue you credits that are “forgotten” in your accounts payable. This money is due to you. Regularly check the dates of the credits to ensure that you are reimbursed if no purchase is planned in the near future.
If you have any questions, our team of experts is available to guide you through the accounting of your business. It will be our pleasure to advise you on the accounting management software adapted to your needs and to help you with the implementation. If you want to save time and money, do not hesitate to contact us !
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