Monthly Financial Review Process

Accurate and timely financial reporting is essential to business success. Financial decisions can be time-consuming and stressful when the books are incorrect. The two most common financial statements needed are the balance sheet and income statement. 

The balance sheet enables you to determine your business net worth by listing all your assets, liabilities, and the equity you have in the company. The income statement shows the business income and expenses, and it calculates your net income or loss. 

Reviewing the books each month is an important part of the financial process. This is because it allows you to review the books to check for any errors, omissions or anything that needs further clarification. And, as time goes on, it enables you to prevent errors before they even occur. 

Over the years, we have implemented a process for reviewing QuickBooks Online, which has helped us streamline our procedures and make us more efficient. This has given our practice more time to do business analysis, financial coaching, and tax planning. 

We've organized the monthly financial statement process into different phases: categorize, reconcile, verify, and report. Throughout the process, our communication will often involve expense categorization questions, receipt backups requests, payroll questions, matching deposits and other important details.

Uncategorized income and expenses are usually less of a problem with better communication. Any unfamiliar entries regarding deposits or expenses need to be confirmed and recorded correctly. After categorizing transactions, reconciliation will ensure everything is accounted for and confirms that bank feeds came through correctly. 

Reconciliation also provides a second opportunity to identify problem transactions that require attention. There are plenty of acceptable reasons to have unreconciled items, but you need to make sure that you are looking at those transactions to make sure they should still be there. And, don't forget that credit cards and loans should also be reconciled. 

After the accounts have been reconciled, we verify the balances and financial information with a focus on the balance sheet. The balance sheet shows you the assets (property owned by the business), liabilities (debt obligation of the business), and your equity (your business assets less all debt). 

During this phase, we like to run a comparative balance sheet comparing the current period to a prior period. That way we can see if there are any accounts that have big changes that need to be investigated. Essentially, we're matching the bank account statement to balance sheet balances and loan statements to balance sheet balances. 

Next, we run a comparative profit and loss statement. Typically, we'll compare the current period to last year's same period to scan the accounts and see if there are any anomalies. We're also making sure that expenses have been categorized correctly and that all personal expenses paid from the business are properly recorded. 

By doing so, we're looking at transactions to see if we are consistently categorizing transactions. We're also looking to see if there are deposits in the revenue accounts. This may not be good because revenue is usually recorded with an invoice or sales receipt. 

In addition, we'll review your accountable plan, mileage log, fixed assets and equity section. We're also going to review your payroll summary report to ensure that your tax liabilities match your quarterly returns, as well as request a W9 for any sub-contractors you paid. 

It's essential to understand how your industry's chart of accounts should be set up, and how things need to be categorized. We'll review your chart of accounts and put together financial statements that can be used for business analysis, financial coaching and tax planning. 

Quality cash-flow management service requires a broad knowledge base and a good understanding of accounting and technology. Subscribe to the FFC Program with year-round expert advice from our team as we help you get more organized, more streamlined and more in control of your cash-flow.