You know the old saying, “The shoemaker’s son always goes barefoot?”
Some time ago, as I prepared the books for MY consulting company tax return, I quickly noticed how long it had been since I did a ‘hard-close’ on my own books. Irony.
I harp on my clients–“Keep your books and records 100% up-to-date.” Most of them using a formal checklist process every month. Me? I have no excuse really. It came back home to me how important these seemingly tedious and unimportant routine tasks really are. To catch up, I had to trace back several months, update the bank feeds, reconcile all my accounts to the bank statements to get everything 100% up-to-date. It would have been FAR easier if I’d just taken care of the basics every month!
One of my colleagues doesn’t feel like numbers are her strongest thing, but she has a small business and has to keep up with them. She faithfully updates accounts, invoicing, and records, reconciling her accounts nearly every week. She’s come to terms that those two hours or so a week provide a sort of audit and help her catch the items that don’t add up. Reconciling every week may sound like overkill, but for her, it’s providing peace of mind–bills are paid, potential missing items are found, duplicates avoided–that regular routine works for her.
At least every month, all businesses, big and small, should go through a hard close with the following in place:
- All accounts are reconciled.
- The three GAAP financial statements are up-to-date.
- Simple historical information with key graphs are current.
- A checklist is kept, with items updated, in a document that can be referred to each month. I look at companies all the time who have bad record keeping. And – they never look at the basic financial statements. Or if they do, they have no idea what they’re looking at. I give them them a simple month-end checklist process with hard deadlines and process to fully understand the financial results and predict future outcomes. The value of this basic process can be incredible to drive profitability and cash flow. Looking at my own info revealed 2 significant issues that needed to be addressed which I won’t discuss – but both effected my profitability over time and short term cash flow improvement.
I look at companies all the time who have bad record-keeping habits. In addition, they never look at the basic financial statements! Or if they do, they have no idea what they’re looking at. To help, I give them them a simple month-end checklist process with hard deadlines and a repeatable process to fully understand the financial results and predict future outcomes. The value of this basic process can be incredible to drive profitability and cash flow. When I (finally) looked at my own info, I found two significant issues that needed to be addressed which both affected my profitability over time and short term cash flow improvement.
I preach consistent timely reporting of key indicators – revenue, profit, cash flow, other relative key indicators. Yet, as a solopreneur, I struggle keeping up with own bookkeeping on a consistent basis.
If it seems I’m better seeing every else’s problems, it makes sense. Many of us do that. There are mechanics who postpone repairs on their cars. Fitness center workers not taking time to workout. Housekeepers not cleaning their own house. Insurance agents not purchasing the best policies for their own families. And yes, CFO’s not keeping their books up-to-date. But I learned that I don’t want to continue with that habit. My first client needs to be ME.