Business Owner Mistakes: Not Keeping Company Books and Records Up-to-Date


It’s an all too common problem.

Despite the importance of up-to-date bookkeeping, I often see small and mid-market companies, startup companies, and medical and dental practices that don’t keep their books 100% up to-date and 100% accurate.

They have no ‘formal’ month-end financial close processes in place and do not review their financial metrics.

This is a bookkeeping fundamental, so important to all businesses.  The discipline of staying up-to-date and doing regular reviews creates a sense of team accountability and almost always improves results. Then why don’t companies do this?

Sometimes, it’s lack of interest in numbers. Sometimes there is fear of what they will discover. And sometimes, it’s simply that no one has established consistent, simple procedures to streamline all processes, including the important month-end close.

Sometimes we as business owners avoid the simple truths of seeing our actual results.  I was a 25% owner of a small $1.5mm mechanical services company several years ago.  We make this mistake with our books for about a year.  We were relying on the controller, and we believed the financials up to date and accurate.  Wrong on both.

There was no closing practice, and we didn’t formally review the monthly numbers as a team.  As it turned out, the balance sheet was a mess.  We significantly underestimated our liabilities and overestimated our assets.   We were so engaged in top line growth that we were blind to the basics of a financial footing with a formal month-end close and review process.

In hindsight, we would have been able to make much better decisions and know of upcoming pitfalls and cash needs if we’d had a process for closing and review every month.  As it was, we had to really hustle to save the company and ended up selling it for a sizable loss.

Your company needs a basic month-closing process that includes

  • Reconciling the cash accounts, and all balance sheet accounts to the subsidiary ledgers.
  • Ensuring journal entries are recorded and all transactions are in the correct period.
  • Finalizing monthly financial statements with the actual results summarized and the vital few measures are compared to the operating plan.
  • Discussing the differences between anticipated and actual, and developing action plans to get on, or stay on, the right path.

With today’s bank feeds into most integrated accounting systems, the month end process is much easier, but it still certainly takes some care and the human touch.  Depending of the revenue model and overall cutoffs, the close can take several days, but make it a practice to finalize as soon as possible after the end of each month.

I like a simple checklist approach with all balance sheet support schedules and P&L analyses on one Excel file on the network drive. (See my resource page for a free downloadable checklist.) Have a consistent month-end review scheduled on your calendar every month and sit down with your team to go through the numbers. This can keep those doing the books focused on finishing so they can be ready for the meeting.

With the experience with the HVAC company rooted in my mind, I make sure all of my clients have a monthly schedule to go through a simple month-end checklist.  The financials are produced consistently on a timely basis each month.  We have a recurring monthly calendar appointment go through the numbers with the respective teams.  That is the only way to know where each organization stands, and position us to make the best decisions to keep it as healthy as possible.

Need help developing a closing procedure for your company? Contact me!  Subscribe to receive my free paper on 10 Common Mistakes Business Owners Make.