BLOG #7: THE IMPORTANCE OF A MID-YEAR BOOKKEEPING SYSTEM REVIEW
IT'S A GREAT TIME FOR A BOOKKEEPING SYSTEM REVIEW!!!
THE IMPORTANCE OF REVIEWING YOUR FINANCIAL REPORTING SYSTEM ...
By PROACTIVELY REVIEWING your business bookkeeping in June, you can ensure that your financial records are accurate and organized, allowing you to make more informed financial decisions through to the end of the year.
This will allow you to save essential time, reduce stress, and will ultimately lead to a seamless year-end preparation process.
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1. FINANCIAL DATA SYSTEM EVALUATION
At this point in your fiscal year, you have reached the "halfway point", and a substantial amount of financial reporting data is available for evaluation.
By reviewing your business bookkeeping system mid-year, you are giving yourself an opportunity to assess your year-to-date financial data, allowing you time to identify any adjustments and improvements necessary for your record-keeping, resulting in the ability to manage the system and utilize the results more effectively.
By evaluating your bookkeeping process, you can ensure that your revenue, expenses and cash flow transactions are accurately recorded and reported, allowing you to avoid any potential financial risks and operational/systematic inefficiencies.
2. TIMELY TRANSACTIONAL CORRECTIONS AND ADJUSTMENTS
Reviews of your bookkeeping system at this point in the year, enable you to make corrections to current transactional errors, and adjustments to future transaction processes, thus preventing the "accumulation of identifiable mistakes", making the year-end reporting process more efficient, and saving you both valuable time and additional costs.
3. TAX OBLIGATION PLANNING
Mid-year bookkeeping reviews of expense/cost of goods categories is crucial for determining possible tax compliance issues, but also identifying potential tax deductions/exemptions/credits you may be eligible for, allowing for proactive tax obligation planning.
This proactive approach allows you to gather necessary documentation, strategize for tax savings, and seek professional advice when required. Addressing tax-related matters during the mid-year review assists in the prevention of the "last-minute rush" and reduces the risk of errors and penalties.
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4. FORECASTING AND BUDGETING
Mid-year reviews allow you to analyze your business's financial health and performance. Based on this analysis, you can re-evaluate your financial projections and adjust your BUDGET and CASH FLOW accordingly. This proactive approach lends itself to adapting financial strategies, re-allocating resources effectively, and ensuring informed business decisions through to the end of the year.
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5. FINANCIAL ANALYSIS
Mid-year financial evaluations provide an opportunity to perform a COMPREHENSIVE REVIEW of your company's profitability, liquidity, and performance. It also allows for a COMPARATIVE ANALYSIS of your current financial status with previous periods.
You will gain valuable insights into your business's financial trends and identify areas for improvement.
6. ULTIMATE QUESTION: HOW DO I PERFORM A REVIEW OF MY QUICKBOOKS BOOKKEEPING SYSTEM???
CONSIDER THE FOLLOWING STEPS:
(1) Perform Your June 30th reconciliations of bank/credit card/loan accounts
(2) Review your expense and income accounts. Re-categorize if necessary
(3) Verify the accuracy of your financial transactions. Ensure they are properly recorded
(4) Analyze your financial statements:
(a) TRIAL BALANCE gives you an overview of each account on both the balance sheet and the profit & loss.
(b) CASH FLOW STATEMENT review
(5) Identify any discrepancies, errors, or unusual balances or patterns that require attention
(6) Most importantly: Hire a professional to perform a mid-year review!!!
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