YOUR 7-STEP CHECKLIST FOR MONTH END - STEPS 1-3
Having a month-end checklist is really helpful for ensuring that you stay on top of your business finances.
Like with any ongoing ‘job’, having an efficient process not only makes your life easier, but also makes you more likely to do it! Bookkeeping and accountancy tasks are much better when they are done on a regular basis.
Remember it’s not just about the tax or VAT returns, it’s about having a good understanding of how your business is performing; how close you are to your goals and whether your financial situation is going in the right direction to ensure you get the work-life balance you wish to achieve.
WHY TO CHECK YOUR FINANCES AT THE END OF EACH MONTH
We all know how fast a month end comes around. However, we also know how many transactions and financially-related activities can happen each month. From payroll to invoices and receipts, do a month end check to ensure that everything remains in order.
It is much easier to identify and sort out any mistakes or missing items close to when it happened, rather than trying to figure out discrepancies only a few times a year – no doubt close to a return deadline!
As mentioned at the start, it’s more than just about identifying discrepancies, it is a regular opportunity to get a ‘snapshot’ of your business’ – income and expenditure – and to optimise where, when and how you spend your money, as well as where you make it.
It also means you are less likely to make mistakes or find errors as regular check-ins will highlight where any record-keeping or accounting procedures are not working well for you and your business.
Importantly, at year-end, you can be confident that everything should be in order, thanks to the regular checks.
7-STEP MONTH END CHECKLIST
At A Piece of Cake Accounting, I suggest you consider 7 areas at month end. The first 6 are very common for most start ups and SMEs.
My seventh step is highly recommended as it’s how I help my clients to turn ‘boring accountancy and bookkeeping’ into ‘insightful business guidance’.
- Step 1 – Sales
- Step 2 – Purchases
- Step 3 – Stock take
- Step 4 – Wastage
- Step 5 – VAT checks
- Step 6 – Payroll
- Step 7 – Review
Learn more about each step below.
Step 1 - Sales
Firstly, check through all monies that you have received. This could be through your till or point of sale, as well as from invoices and other revenue streams. Ensure these are reconciled across your accounting software, spreadsheets and bank accounts/statements.
It is important to reconcile your till with bank receipts and cash taking, also making sure that any service charge or tips received are recorded correctly and ring-fenced for paying out to staff. If you need support with the strict rules regarding service charges/tips and VAT, income tax and NI implications, do get in touch.
Ensure these are checked. If you are VAT registered, sales recording is more regulated and all VAT registered businesses must comply with MTD (making tax digital) for VAT. This is why doing monthly checks are important.
As well as for tax purposes, recording sales also helps you make informed business decisions, especially if you record your sales by categories.
Each business is different, so you need to decide what is important for you. It can be splitting breads and pastries in the bakery, or breakfast and lunch sales in the coffee shop, or the different types of services you offer. The splitting and grouping of sales can give you so much information and have a positive impact on your business future. You can start investigating and making changes to ensure your customers are spending more with you.
We all know that the most important figure in our business is sales, so make sure to give it enough attention and love.
Step 2 - Purchases
Next, it’s time to check the money going out – what have you paid for this month? Ensure all outgoing and expenses are accounted for. Don’t forget the small cash purchases or the item you paid for from your personal account. You shouldn’t be using your personal account for business expenses, but it happens! If you have this month, remember that it must be recorded, otherwise your figures will be meaningless.
Check that you have the relevant receipts, bills, invoices, as well as credit card statements. Record keeping is very important, as HMRC has quite clear guidance on what they expect you to keep and for how long. If you are VAT registered, this becomes more important and the rules are even more strict. However, this is very easy if you have correct processes in place and if you are using correct tools – contact me to find out more.
Keeping records might be law but it can also help to ensure your business grows and is profitable. For example, with the correct records you will spot price increases very quickly and will be able to change supplier, if needs be, before it’s too late. With rising costs, this is so important.
You will be able to react to outside changes (the ones that you have no control over ) much quicker than your competitors too.
Again, ensure these are checked and reconciled across your accounting software, spreadsheets and bank accounts/statements.
Step 3 - Stock take
In any product-based business, it is essential to know what you have ‘in stock’ so as to minimize waste, over ordering or risking going out of stock of important items.
Alongside this check list, ensure you have a simple to follow stock take sheet that you can use on a monthly basis.
STEPS 4 - 7
I know this is turning in to quite a long post, so I’ve separated it…to help with scrolling fatigue. Click here to see steps 4-7 and also to download a PDF version too.
While this blog aims to provide helpful information, it’s important to remember that every business and person is unique. So, before making any decisions, we highly recommend seeking professional advice. We want to ensure that you have all the support you need to make the best choices for your situation!