Running business is not a simple job.Today, we are going to talk about 3 key things in finance/accounting on your day to day operation.
Bank reconciliation
As a lot of businesses write hundreds of checks each month and make many deposits, the task to reconcile the amounts on the books with the amounts on the bank statement at month-end can be a big challenge. What is the benefit of doing this? The benefit is to ensure the money flown out of the business bank account are consistently recorded by the company’s books. That means the assets (cash/bank balance only) are secured and you won’t be caught off-guard with some surprises on unrecorded spending. The process looks straight-forward but throw you off when some items are shown in the books but not shown on the bank statement. Some recommendations below may give you/ accounting team a boost in managing the reconciliation process:
• Separate recurring/non-recurring items before the reconciliation process
• Consolidation of accounts to match company strategic activities like investing/operation
• Leverage monthly bank statement to use as a proxy of cash flows
Accounts payable
Accounts Payable is the one key business process as virtually the majority of the funds that flow out of the business must first pass through AP. Quickly recognizing the red flags of AP fraud in your books/business becomes critical. Here are some tips:
- Conduct a regular review on AP operations
- Set up a pre-approved vendor list to avoid unknown/suspicious AP fraud
- Monitor transactions with $ threshold
Monitor your business’s financial health
We touch a bit on the processes on the cash and accounts payable. How do you manage your business’ financial health then? If you’re like most small business owners, you’re probably relying on your accountants to tell you the change one year later – when you need to file your tax. Actively monitoring the financial health, just like checking up your own health. The earlier, the better. Financial health is about your cash flow position, product profitability as well as other business drivers related to your specific business. If you don’t monitor/track it you will not be able to drive it. Metrics are very important. Pick up a few relevant KPIs(the financial goals like revenue target, profit margin, etc.) and create an action plan and work towards it. You will see the result. Guarantee!
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