Most entrepreneurs are lost when it comes to what they expect from their accountants. In addition, not all business owners are adept at handling finances. However, it’s important as an entrepreneur to familiarize yourself with basic bookkeeping and money management principles and activities. Having consulted for several SMEs, I’ve developed an easy checklist with timelines, that you can use to gauge your understanding of the financial state of your business, as well as what to expect from your accountant.
1. Daily Accounting Tasks
Check Cash Position
It is important to get the cash position from your accountant on a daily basis, considering that cash is the fuel for your business. As an entrepreneur, you should start your day by checking how much cash you have both in hand and in the bank. The cash position is a sign of financial strength. In a business cash is needed to fund growing operations and pay off obligations and as so it’s important to always know how the balances are.
2. Weekly Accounting Tasks
Your accountant should ensure that all transactions (billing customers, receiving cash from customers, paying vendors, etc) are recorded in the proper account daily or weekly, depending on the business volume of transactions
I highly recommend entrepreneurs to invest in an accounting software, as this makes capturing of data easy. Most entrepreneurs are afraid of the cost of an accounting system, however the benefits and controls it gives far outweigh the cost.
Document storage and filing
The accountant should ensure that at all times proper records are maintained. A common habit is to toss all paper receipts into a box and try to decipher them at tax time.
I was recently helping two clients, one was migrating from a manual accounting system to a software based system. I must admit that much of the data was missing and the little that was there, was not properly filed.
While carrying out an internal audit for a different client, most of the receipts supporting the client’s business meetings and travel expenses were also missing some narration.
Proper Keeping of all receipts cannot be overstated.
Review and payments of Suppliers ageing
The accountant should prepare a monthly payable ageing report, categorizing payables to suppliers based on time buckets. The report gives a breakdown of what you owe your suppliers and the payment due date. The intent of the report is to help you figure out how well you are paying your bills, as well as help you prioritize payments.
Review of debtors ageing report
How often do you find you are celebrating your sales victories only to find out later that some of these accounts haven't paid their 1st invoice or they are paying late?
The debtors report is an important financial document that you as a business owner shouldn’t overlook. It gives details of the list of outstanding invoices that customers are yet to pay, and tells you at a glance how well you are doing at billing and collecting of invoices. Of key importance is to understand the importance of collecting money on time so that you don’t leave cash on the table.
Invoicing customers promptly and making payment easy is a good way for your business to maintain cash flow.
It is critical that your accountant contacts the customer for all information required to set up their account. Having worked with several entrepreneurs, more often than not the invoices sent to clients are incomplete. It's only when paying for VAT or receiving payments from clients that they discover that customer PIN details or payment details were missing.
To ensure that your invoices are paid on time, your accountant should invoice timely, stay in contact with customers, include payment options and details on all invoices, make sure customers are aware of the terms of trade and the business’ policies on overdue payments.
Review Projected Cash Flow
Managing your cash flow is critical. Forecasting how much cash you will need in the coming weeks/months will help you reserve enough money to pay bills, including your employees and suppliers. It will enable you to make more informed business decisions about how to spend it.
Your accountant should prepare a simple statement showing your current cash position, expected cash receipts during the next week/month and expected cash payments during the next week/month.
3. Monthly Accounting Tasks
Monthly Bank Reconciliation
Just as you reconcile your personal checking account, you need to know that your cash business transaction entries are accurate each month, and that you are working with the correct cash position. Reconciling your cash makes it easier to discover and correct any errors or omissions—either by you or by the bank—in time to correct them.
Analyse Inventory Status
If you have inventory, your accountant should set aside time to reorder products that sell quickly and identify others that are slow moving and may have to be marked down or, ultimately, written off. By checking regularly (and comparing to the previous month’s numbers), it’s easier to make adjustments so you are neither short nor overloaded.
As an entrepreneur you may not have sufficient knowledge of all your tax obligations, that is, what is expected of you and your business. However, that is exactly where an accountant can help. A great accountant should be active long before the end of your tax year, so that they can advise you on how to structure your finances efficiently.
The accountant also ensures that correct filing and payment of statutory deductions is done to avoid accruing any penalties.
PAYEE and NHIF payments are submitted and paid by the 9th of the following month, VAT payable is due by the 20th of the following month, whereas NSSF is due by the 15th of the following month.
Budget Preparation & Review
With the help of your accountant, it’s important to develop the most important business tool – the budget. Budgets allow a business owner to not only plan for expenses, but to analyze expenditures and make changes according to the needs of the enterprise. It gives a business discipline when it comes to spending.
A budget also allows a savvy entrepreneur to plan for future financial needs, such as emergency repairs, improvements and expansion without the need to rely on credit or loans.
After the budget has been developed, it’s important to analyze the actual results at the end of each month. Compare your actuals with the budgeted, and try to develop a sense of how you performed in relation to your budget goals.
The accountant should prepare four basic statements that summarize the financial activities of the business monthly. This business financial statements show you the money. They show you where a company’s money came from, where it went, and where it is now.
The key financial statements being income statements (these statements show how much money a company made and spent over a period of time), balance sheets (these show what a company owns and what it owes at a fixed point in time), cash flow statements (these show the exchange of money between a company and the outside clients over a period of time)
In general, an accountant should be much more than the above. Finding the right one for you will not only save you time and money, but will also help you to grow your business, increase your wealth, reach your life goals and give you peace of mind.
A good accountant will take a genuine interest in you, your business, and what you are trying to achieve. A good accountant will help you prosper as your business also thrives.