A monthly close makes great sense for small businesses. If you’re using an accounting software (we hope you are!), daily entries are not always possible because of all the other tasks you have to do for your business. However, a diligent, consistent practice of getting your transactions (both incoming and outgoing cash) up-to-date is critically important to see how your business is performing. This article has good tips on the process.
“Having accurate, timely financial information is critical to support decision-making.” We agree: if you have any major expenses coming up, if you know your business experiences up-ticks or slow-downs during a season, or if you’re trying to decide whether or not to hire a new employee, having up-to-date financial information is critically important. It’s not just about how much money you have in the bank, but how much you owe your vendors and how much is owed to you that can have a major long-term impact on your business.
If you have an accountant do your books for you, it’s also critically important that you review them. The review helps you ensure accuracy, which will make a big difference when tax time comes around, and it will also help you understand how your business is performing. Here’s a good article to get you started with the review process.
If you find this process overwhelming or if you want an expert to review your financials with you, contact your local SBDC. Their expert advisers are free to entrepreneurs and provide excellent advice and resources for your small business development.