Keeping your Monthly Accounting on Track? With the sheer number of daily tasks to do when you are running your own business, it is easy to lose sight of the bigger picture and lose track of your business. This is where a monthly checklist would come in handy to help you refocus your effort. This way, you can achieve your long-term objectives effectively. We discuss 5 Key areas to check every month. 1. Review the Debtors Debtor management is crucial to ensure that your business has sufficient working capital to reinvest and grow. Apart from having the practice of invoicing your customer as soon as your good or service is delivered, you can review your credit policy and terms of trade to ensure they are appropriate for your organisation risk profile. It includes areas such as prepayments, down payments, terms and any discounts for early settlements, which should be clearly articulated to both debtors and staff. This task would mitigate risks as issues such as slow payers would be identified. Next, you need to make sure your sales staff are aware of debtor’s position and to assist with collection process. If debt is not recovered after few friendly reminders and negotiations, you could engage a debt collection service. Putting the matter to professional could restrain your business relationship with the hirer, however it may be more important to get the money you are owed. The following screenshot shows list of customer’s sales invoices with their current balance. With Financials 365, after creating account receivable, you can send reminders or finance charge memos to customers with overdue balances. In addition, you may want to debit their accounts for interest or fees. 2. Analyse Inventory Status Being on top of your inventory is essential as inventory plays an important role in smooth functioning of a business. Too much inventory could mean less cash flow as it tied up in products while too little leads to losing customer. You could start with performing regular inventory counts and set aside time to reorder products that sell quickly and identify others that are moving slowly, to be marked down and ultimately written off. Moreover, check whether your stock level is in line with the sales forecast, based on previous month’ prediction and trend. Lastly, having the right inventory management solution would help in ensuring efficiency, greater security and easier data tracking. This activity is especially useful when you are in a manufacturing, distribution or retail business. Below is the screenshot of Financials 365 inventory table, outlining items details such as cost, price, costing method and its location. As a start, user is able to define general inventory rules and values, such as requirements on supply planning and basic warehouse activity documents. With Financials 365, analysing inventory status starts with setting up inventory counting period at some recurring interval. The ‘Calculate Counting Period’ helps you to perform physical inventory check by automatically creating lines for the bins containing items or SKUs. 3. Review Superannuation Entitlements of Employees Ensure that your business comply with legislation regarding frequency of payment, choice of fund and reporting to staff. Some super funds require employers to make contributions monthly. When you register with a fund with this requirement, you are agreeing to make monthly contributions to that fund. One trick that you could utilise as a small business owner with less than 20 staff members is to register for Small Business Superannuation Clearing House. This is a free service offered to all small businesses in Australia provided by Australian Taxation Office. A super clearing house allows you to make single online payment for superannuation contribution to all employees’ super funds according to each employees’ preferences. It minimises the risk of payment errors, reduces super compliance costs and save time. 4. Review PAYG Witholding Obligations It is important to note the difference between PAYG instalments vs PAYG withholding. PAYG withholding is your legal requirement to keep portion of payments made to your employees and other business, which you then pay to the ATO. Meanwhile, PAYG instalments allow you or your business to meet your income tax obligations and generally paid by business owners, investors and sub-contractors. After you register for PAYG withholding, always ensure that employee PAYG withholding declarations are up to date. Do you know that you can request an increase or decrease in the rate or amount of withholding? Under tax law, Commissioner of Taxation may vary the amount a payer is required to withhold from a withholding payment, to meet the special circumstances of a special case. 5. Prepare and analyse P&L statement, balance sheet and cash flow statements Although SME could do this quarterly, it is advisable to do this monthly. Start by getting the regular financial statements from your financial software and review them by trend and ratio analysis. Many financial ratios use data from multiple statements. The most fundamentally important analysis is liquidity ratios, where it measures the ability of a company to remain in business. One thing to be aware of in interpreting the analysis results is that financial analysis only reviews current company’s financial information and not its operational information. Thus, it does not include the variety of key indicators for future performance such as changes in warranty claims and size of order backlog.Financial statement analysis is an exceptionally powerful tool for a variety of users of financial statements, each having different objectives in learning about the financial circumstances of the entity. This way, potential problem could be identified and adjustment could be implemented in time to further improve sales and profit margin. As an example, below is a screenshot of cashflow interface on Financials 365. Setting up cash flow forecast is easy in Financials 365. With the forecast, you can predict how and when you expect money to be received and paid out by your business so that your business will have enough cash to pay creditors and expenses when they fall due. These are 5 key things accountant should do monthly. You could eliminate the hassle and staying on top of your obligations by using online accounting software such as Financials 365. We can automate complicated process and saving your precious time and effort. Contact us here if you would like to know more about us.