Small business owners are almost superheroes. Their day-to-day tasks include everything from meeting suppliers and warehouses to interacting with customers and overseeing every activity.
It’s a lot to handle. On top of it all, they need to check their accounts every day and manage their financial statements.
Accounting needs to be done almost religiously. One of the best ways to handle the hectic schedules is to maintain a calendar with fixed hours dedicated to monitoring accounts every day.
This checklist is divided into two parts:
- The initial accounting checklist for new small business owners
- The accounting checklist for experienced business owners.
The first checklist is designed to help new and financially inexperienced business owners grasp accounting concepts they need to become familiar with.
The second checklist will help experienced small business owners understand and tick off tasks that need to be done every day, week, month, quarterly and year and overcome their general accounting challenges.
Initial Checklist for New Small Business Owners:
- Understanding Business Accounting: The first step for new small business owners is to understand the two types of accounting- cash-basis and accrual accounting, and their impact on financial reporting. In short, cash basis accounting is costing when the payment occurs, and accrual is costing as costing occurs and recording the payment if/when it is done separately.
- The Holy Trinity of Finance: The second step is to become familiar with the balance sheet, income statement and cash flow statement. These will become the basis of all financial and business decisions you take- including model business scenarios, predicting financial performance and taking appropriate business decisions. These financial documents are also key to any potential investors and equity buyers as well.
- Separate personal and business accounts: Open a bank account for your business and manage different categories for transactions. You may need to take articles of incorporation or organization, employee identification number (EIN) and personal identification.
Hire an accountant or tax advisor to help you with anything you don’t understand with numbers. Accounting errors can cost you heavy fines from state and federal agencies. There exist several financing and accounting software in the market that can help with tracking budget and transactions by producing financial statements for your small business.
The Accounting Checklist for New and Experienced Business Owners
Daily Checklist:
- Check your Cash on Hand: The first thing your business should do at the end of the day is to check the cash your business has on hand. Ensure you have enough to cover expenses or transactions you’ll do on the day-to-day business. This will also help you catch any fraudulent or accidental expenses and sales, as well as have enough time to apply for an alternative financing solution if you need it. If you’re expecting cash later in the week, or at a later time-it doesn’t count as cash on hand. It’s important to maintain the balance between what you have and what you need to spend on. For instance, small restaurant businesses have a continuous cash flow and need to balance the money coming in from customers and cash paid to produce and ingredient suppliers.
- Note Transactions: Note every transaction being done from morning to evening. Collect all receipts and invoices you give and receive (this will also help with taxes later!) and even if you can’t physically note them all down at once, save them each day in a folder or on your system. Also, keep a record of all the sales you make! This can be done daily or weekly depending on the volume you receive.
Weekly Checklist:
- Invoicing Customers: Ensure that invoices are sent for every sale that requires one. Follow up weekly on every invoice that has been sent as well as payments due. Set up reminders for customers to pay invoices every week. If any payments are overdue, you’ll need to directly reach out to the customer, or send an “invoice collection” notice.
- Pay any invoices: Paying off invoices if you’re low on cash can be hard but that’s why it’s critical to do it as soon as you receive payment and once every week so they don’t pile up. Note down the vendors, payment due date and the amount due and set up alarms reminders for payment well before the due date. Tie up with vendors and suppliers who offer discounts for early invoice payments to make the most profits.
- Pay your Employees: Paying your employees on time is the key way to keep your employee morale up, encourage a sense of job security and maintain smooth operations. Pay your employees on time either weekly or monthly and ensure paychecks are sent out consistently.
- Record Transactions: If you have a low volume of transactions, record them once at the end of the week rather than daily. File and organize all payments due, payments received receipts, bills, etc.
- Monitor cash flow: Check whether your cash flow has met the predicted weekly forecasts. If not, you may analyze where there has been an increase or decrease and why. This will help understand your business better, as well as predict future cash flow trends and re-plan budgets.
Monthly Checklist:
- Review of Debit and Credit: The balance of the books should be the first thing on the list of every small business owner every month, says NFIB member Steven J. Weil, Ph.D., president of RMS Accounting. Several processing problems can occur either with money be debited or credited in bank accounts and should be checked to avoid large financial losses. Auto debit has caused businesses to lose hundreds or thousands of dollars due to a lack of a watchful eye over accounts. Match each line in your own books or records with your bank statements for each transaction.
- Check your Inventory: If your business sells or buys any inventory, review your stock once as well as check for any stolen, missing or damaged inventory. You may like to re-stock more inventory or revise your inventory sales.
- Payroll Taxes: Check IRS Publication 15 or this payroll calendar to keep track of if your payroll taxes need to be paid monthly or semi-weekly. Send your tax payments accordingly to the appropriate government agencies.
- Review Financial Statements: At the end of every month, go through all your financial statements- income sheet, balance statement and cash-flow statement. This can reveal a lot about your business. Understand which parts of your business are running smoothly, and which parts are slowing your operations down and see if any improvements on these can be done. Analyze your profits and losses with those of previous periods to highlight where you may be spending too much or not spending enough. Also compare your predictions with the current statements to check returns on assets and liabilities.
Quarterly Checklist:
- Analyze Profit and Losses: Is your business headed on the right track? This is the best time of the year to analyze your profits and losses and check if the revenue and expenses follow in-line with your annual projections. If not, you have time to make some needed changes before the end of the fiscal year. Identify sticky spots that need improvements to reflect better on sales and margins. These reports can help create new business plans and strategize for the months ahead.
- Pay your Taxes: If your state(s) uses sales tax, you need to pay these to avoid penalties and fines. A small business accountant can help you pay these on time and make sure you aren’t overlooking anything important. Quarterly payroll tax filings need to be done, as well as estimates of income tax; the IRS and some states consider this mandatory. Paying taxes all at once can be a headache, so this reduces the strain by paying a little at a time. Review your year-to-date to make sure you haven’t left anything out.
Yearly Checklist:
- Confirm your bookkeeping is up-to-date: Let’s be real, the discipline of accounting isn’t always followed. Check if your book-keeping is all caught up and you haven’t missed out on receivables or payments anywhere. The end of the year is the time to face taxes and get your finances in order. Once your statements are all organized, go through each one to make sure you have not missed out on anything.
- Inventory and Equipment Review: At the end of the year, go through all inventory and equipment to plan for the year ahead. Check if anything needs to be sold off quickly (time for a sale!) or any equipment and parts need to be replaced for happy business in the year ahead. Check if your inventory levels are enough, and what items you should stock upon or not repurchase.
- Do a profit- loss review: This is the time to see if your fortune-predictions came true! Review your income and balance statements and tally up all profits and losses. If you’ve done your financial forecasting correct- your revenue should meet and even surpass what you had planned. Understanding your business statements is like reading your company’s medical reports- the number reveals the health of your small business.
- Tax Preparation and Filing: The busiest time for accountants and business owners alike, is here! This process is a tedious and exhaustive one so start well-ahead to meet all IRS and state requirements, as well as to ease the work for your accountant. Fill out forms W-2 and 1099-MISC for full-time employees and independent contractors respectively. You can save both time and money by opting for an e-filing process to help out with this.
Finally, reflect on your overall business and address questions such as how you feel your business performed over the year and any lessons you may have learned. Note down and apply everything to your business in the years ahead and your business is sure to be a financial success!
