Small business accounting tasks—sounds pretty intimidating, right?
Have you ever found yourself sitting at your desk on the first nice weekend of spring, facing a huge pile of receipts and bank statements?
If you’re like many small business owners, you have rushed to create your bookkeeping file for the previous year just a few weeks before the spring tax-filing deadline at least once since starting your business. And, like most who have found themselves in this position, you probably swore to never let this happen again.
Or maybe you have gotten to the end of the month, quarter, or year, only to discover your expenses were much higher than you anticipated.
Business ownership is a full-time job, even without adding accounting tasks into the mix. How do business owners find the time to keep on top of their accounting tasks? Hiring a bookkeeper to do some of these tasks for you is a great step, but even that doesn’t relieve you of all the responsibility surrounding your business’ accounting.
Following is a list of the six accounting tasks you should be doing—or making sure are getting done—every week.
Bank feeds, which connect your online banking data to your accounting system, have dramatically streamlined the accounting process. If you log in to your accounting system each morning and work your bank feeds, you will find you spend mere moments a day on this accounting task.
Why do this daily? You are much more likely to remember why you made a transaction yesterday than you are if you wait a week. Trying to remember why you went to the office supply store on Monday when it’s now Friday only serves to make this task take longer, so work your bank feeds daily.
Either right before or right after reviewing your bank feed, log in to your online banking account and review your balance and pending transactions. But, wait? Didn’t we take care of this by working our bank feeds?
Only settled transactions come through in the bank feeds. Most banks settle at close of business each day, meaning any transactions that occurred overnight won’t appear in your bank feed until the following day (and sometimes it can take a couple of days for transactions to settle). Your online banking, though, reflects your pending transactions and the effect those have on your account balance.
Even if you’re sure you have more than enough money in your bank account and don’t have to worry about accidentally overdrawing your account (and incurring meddlesome overdraft charges), check your pending transactions anyway. The sooner you detect bank errors or fraudulent transactions, the easier they are to remedy.
You might be wondering why this is on a list of accounting tasks, but backing up your hard drive it’s critically important. You never know how much valuable, irreplaceable information is on your computer until you experience a hard drive failure. There are dozens of cloud-based, inexpensive, automated backup systems available, so this is a daily task you can put on autopilot.
This is a critical small business accounting task. Even if your payroll is on a biweekly or semimonthly basis, you should review your employees’ timesheets weekly. Ideally, you want to check these two days before the end of the work week. This is a way to avoid surprise overtime liabilities. Once an employee works over 40 hours in a week, even if it is unauthorized, you are on the hook for overtime pay, so take this proactive step to protect your bottom line.
Even if you are careful about your spending, it’s easy to exceed your budget if you don’t track it regularly. If employees have business credit cards in their name and the authorization to use their own discretion when making purchases, expenses can get out of control even more quickly. Comparing your month-to-date P&L with your budget weekly will help you make wise spending decisions and avoid the shock of a lower bottom line at month-end.
Even if you aren’t ready to embrace a completely paperless office, scanning your documents and receipts into a cloud storage system will protect your important records from degradation due to heat and time. In the event of an audit, you will be able to provide any requested backup documentation quickly and without fear the document will not be readable.
Once scanned, you can shred the paper, saving valuable office space. Not comfortable getting rid of the hard copies? Don’t waste your time by filing the paper into separate folders by vendor. Instead, file the entire scanned batch into one folder or envelope, marked with the scan date and the date range of the receipts and documents included in the folder.
A final note on this accounting task: While you, the business owner, can do the scanning yourself, this is a perfect task to delegate to a high school student or intern. If you have tween or teenage children, paying them to do your scanning for you lets them earn some money and qualifies as a business expense.
Add accounting tasks for a once-a-month review as part of your regular routine, and you’ll be on top of things.
There are several reasons to do this accounting task. If your bookkeeper or accountant reconciles your bank statements for you, this is a good check to ensure the reconciliations are being done accurately and in a timely manner.
Keep an eye open for postings to a “Reconciliation Discrepancy” account. Most accounting programs offer this option as a way to force an account to reconcile. If the difference is only a few cents, posting to this account isn’t a huge red flag. If, however, there are large balances posted to this account, ask your bookkeeper or accountant why they made the adjustment.
Another reason to review your statements and reconciliation reports is to detect possible fraud. Ideally, your business should segregate duties such as accounts payable, accounts receivable, taking deposits to the bank, and reconciling the bank accounts, but in reality this isn’t always possible. Having the same person perform the bank reconciliation and these other tasks could make your business susceptible to employee dishonesty. Reviewing your statements and reconciliation reports will help you detect any issues (and your team knowing you do these reviews may prevent anything bad from happening at all).
I get it: Reading your financial statements isn’t at the top of your to-do list. But taking 30 minutes to do a screenshare video call with your bookkeeper or accountant to review your financial statements each month will help identify any potential financial problems in your business before they become difficult—or impossible—to fix. If you outsource your bookkeeping, this will also allow you to answer questions your bookkeeper might have, and vice versa.
Understanding your financial statements is key to growing a profitable business, but most small business owners don’t really understand what their financials are telling them. For this reason, reviewing your statements with your bookkeeper or accountant is one of the most important accounting tasks you can do in your business.
Taking the time to complete these accounting tasks ensures that your bookkeeping stays up to date and your bottom line is protected. Done on a regular basis, these tasks take mere moments. The return on your investment of time, though, is astronomical.