10 Steps to Getting Your Finances in Order

One of the most important things you need to do as a business owner is to regularly monitor your business performance and finances.  However there is no point looking at out of date data. In addition we, along with many other accountancy firms, now price year end accounts and tax services (amongst others) based on the quality of data – so you may find your fees decrease if you can keep things tidy! Our 10 steps to getting your finances in order are listed below.

This article will outline the best things you can do to ensure your finances are in order and Xero is ‘clean’ and ready for reporting purposes. We are going to focus on Xero – those with spreadsheets and other systems can still go through some of the same points.

The 10 steps

1. Ensure all bank transactions have been reconciled
2. Once all items have been dealt with – does your bank balance match what the bank account says it is? This includes credit cards, merchant accounts such as Stripe and PayPal and Direct Debit feeds. Check your sales invoices – have they all been paid? Are there any that need crediting or writing off as a bad debt? Are there any that you need to raise?
3. Check your purchases invoices – are they actually still outstanding? One of the most common problems we see is where a bill has been processed in Xero, but the bank transaction has been entered as a ‘Spend Money’ transaction – this in effect duplicates the transaction. Are there any purchase invoices that haven’t yet been paid but also haven’t been processed and aren’t showing in Xero?
4. Have you logged any expenses that were paid by you personally on behalf of the business?
5. Have you logged any mileage incurred on business journeys?
6. If you have stock – have you done a monthly (minimum!!) stock take and noted down any adjustments for wastage etc?
7. Now that you’ve checked the most common areas for errors, you can look at your reports for anomalies. We recommend starting with your Profit and Loss report (Accounting > Reports > Profit & Loss)
8. Change the date range to last month, and then add in a comparison period (it currently defaults to 4, but you can include more if you’d prefer), and click ‘update’.
9. Your monthly operating expenses should be fairly consistent. Investigate any anomalies – it may be that you have mis-coded a transaction (software subscriptions are often coded against ‘subscriptions’ rather than ‘IT Software and Consumables’ – it doesn’t matter as long as you are consistent each time. Sometimes an increase in one month is expected and you can leave it there, but it’s best to check. One of the most common mis-codings is wages. Payment of wages to staff and directors should be allocated against ‘Wages Payable’ NOT Salaries – you will know you have done this if your figure in the Salaries account looks high to what it should be.

Following these 10 steps will ensure your books are in good condition and means that the reports you run will be accurate. There are other steps to take but they can get a bit technical, and would be best dealt with on a business finance or bookkeeping course. There are plenty of courses out there, but our regulatory body, AAT, have recently released a Business Finance Basics course. You can find out more here and of course, if you would like to free up your time to focus on the business, get in touch  to see how our bookkeeping services can help you.