If you outsource your bookkeeping or someone on your team manages it, you may think you don’t need to review it.
But reviewing your books at least once a month, keeping an eye out for any irregularities, and asking your bookkeeper questions about anything you don’t understand is key to maintaining your business’ financial health. Here’s why.
First, it helps you understand any overarching trends in your business so you can make more informed decisions. Your bookkeeper can alert you of any discrepancies or trends in your books, but you, as the business owner, are the best person to understand and explain why those may be happening and use that data to guide your decision making.
For example, how much did you spend and how much did you make that month? Were there any irregular patterns in your books? Why were profits higher or lower? Did you not get paid for something? Did a vendor raise their prices but you didn’t? Do you need to make pricing adjustments? Is there a reason your water bill was higher than normal this month (i.e., more customers) or is there an accidental leak in your pipes?
Second, it protects you and your business from fraud by ensuring that all financial information has been recorded accurately. Were there any higher-than-usual or out-of-the-ordinary expenses that you can’t explain? Did your vendors expense you correctly? Keeping a proactive eye on revenue and expenses will help you and your team tackle any issues as they arise—rather than finding out about them when you go to file your taxes.
To be clear, reviewing your bookkeeping doesn’t mean you need to micromanage the work of the person who maintains the books or spend lots of time on daily financial operations. It means you should review your books in tandem with them to ensure you understand everything and that you can explain any unusual changes or fluctuations in your expenses or revenue. You know more about your business than anyone else, so you’ll be able to tell quickly if any numbers are off and provide any insight for why that might be.
Because of this, effective financial systems require multiple people to be involved as a natural method of checks and balances so that nothing slips through the cracks and creates headaches later. And don’t forget: while they are the bookkeeping experts, note that you (the business owner) are ultimately the one held responsible for your own books.
Consistent, proactive financial management can help keep you and your business compliant and profitable. But most importantly, it gives you peace of mind and the power to make informed business decisions that can set you up for success for years to come.
Our team works closely with small businesses to set up and maintain financial infrastructure, interpret financial information, and provide recommendations that can improve business’ financial health. Reach out to our team if you’re looking for support in these areas.