Cofinia has been assisting SMEs with business and accounting management since 2016. Many clients have approached us to help them update their business accounting, knowing there was an issue. However, in many other cases, we have had to advise the client of deficiencies and issues we have found when they have entrusted us with a bookkeeping or system migration mandate.
Here are 5 accounting tips to make sure your accounting is in order:
1. Are Your Bank and Credit Card Reconciliations Done?
Accounting may seem very mundane to some people, but it has its challenges. Too often we find that bank reconciliation is not done. With accounting software such as Zoho Books and Quickbooks that synchronize with your bank accounts and regardless of the transactions, it’s easy to think of these reconciliations as a proper reconciliation.
2. Are Your Taxes Properly Set Up and Tax Reports Properly Executed?
It is not enough to have 5% GST and 9.975% QST rates, you must also know when to use them. For example, do you apply a 50% reduction on these taxes for entertainment expenses? What is the periodicity of your tax reports? Are the revenues declared for the period identical to the revenues invoiced? Have you taken into account transactions or corrections recorded at a date prior to your last report?
3. Do the Balance Sheet Items Include Amounts That Have Not Changed for More Than One Fiscal Year?
This may be normal for capital stock, but it is not normal for prepaid or accrued expenses. Too often, amounts are recorded in these accounts, but are not properly processed afterwards. Prepaid expenses should be reduced periodically. For example, when paying an annual insurance premium, one would put 11/12 of the amount in prepaid expenses in the period and this would reduce the amount periodically each month.
For accrued expenses, it is common to record, for example, a bonus provision or an expense for an invoice that will be received in a future period. Often, when it comes time to process the invoice or bonus disbursement, the expense account is applied a second time instead of reducing the accrued expense. This may be a simple oversight, but it will affect the company’s results.
4. Do Your Financial Results Fluctuate A Lot Each Month?
I really like to look at a comparative income statement. I compare it month by month year-to-date or compare the current month to the same month in the previous year if the company has cyclical operations.
I analyze the variations for each revenue or expense line. Often, the expense amounts are larger in certain months, indicating that the accounting treatment is not appropriate. This is often seen in equipment costs. We sometimes forget to record a fixed asset when we buy a computer.
One of the accounting principles is to spend an expense in relation to the life of an asset. This is how depreciation should be calculated. This way of analyzing the results will also help to detect double entry errors.
5. Have the Year-end Entries Been Entered?
At the end of the year, you send your information to your accountant to file your tax returns and sometimes a notice to the reader or a review engagement. The accountant will certainly have to make adjustments, for example, reclassifications, non-routine transactions such as asset dispositions, but also the calculation of depreciation and taxes.
These entries are usually sent by your accountant along with the financial statements. These entries must be posted to your accounting system to ensure 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 Vendor Invoices?
In many cases, suppliers issue you credits that are “forgotten” in your accounts payable. This money is owed to you. Check the dates of the credits regularly to ensure that you are reimbursed if no purchases are expected in the near future.
If you have any questions, our team of experts is available to guide you through your company’s accounting. 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!