Bookkeeping is easier to manage when it follows a consistent monthly process.
When accounting records are left until the GST filing deadline or corporate year end, missing receipts, unreconciled accounts and incorrectly recorded transactions can accumulate. Resolving those matters several months later is usually more difficult because the details are no longer recent.
The following monthly checklist can help Alberta business owners maintain more accurate and useful accounting records.
Reconcile Every Bank Account
Each business bank account should be reconciled to the accounting records every month.
A bank reconciliation confirms that deposits, payments, bank charges, transfers and other transactions have been recorded. It can also identify duplicate entries, missing transactions, old outstanding cheques or transactions recorded in the wrong account.
The reconciliation should agree to the actual bank statement, not simply to the balance displayed through a bank feed.
Reconcile Business Credit Cards
Business credit cards should also be reconciled monthly.
Each charge should be supported by a receipt or invoice and recorded according to the nature of the expense. Credit card payments should reduce the credit card balance rather than being recorded as a second expense.
Personal charges made using a corporate credit card should be clearly identified because they may require different accounting or tax treatment.
Review Unusual and Uncategorized Transactions
Accounting software may suggest a category based on previous transactions, but that suggestion is not always correct.
Transactions recorded as uncategorized, miscellaneous, ask my accountant or general expense should be reviewed each month. Large or unusual transactions should also be examined to determine whether they relate to equipment, loans, shareholder activity, prepaid expenses or another item requiring special treatment.
Correcting these transactions while they are recent is generally much easier than correcting them at year end.
Save Receipts and Supporting Documents
Receipts, supplier invoices, contracts and other supporting documents should be retained in an organized manner.
A bank or credit card statement shows that a payment occurred, but it may not provide enough information to determine what was purchased, whether the expenditure was incurred for business purposes or whether GST was paid.
Electronic copies can be attached to transactions in many accounting systems. Whatever method is used, it should be applied consistently and documents should be accessible when required.
Review Customer Accounts
If the business sells on credit, review the accounts receivable report each month.
Consider whether:
- All sales have been invoiced
- Customer payments have been applied correctly
- Any invoices are overdue
- Deposits or retainers have been recorded properly
- Any balances are unlikely to be collected
Regular review helps the business follow up on overdue amounts and improves cash flow management.
Review Supplier Accounts
Businesses that maintain accounts payable should review unpaid supplier invoices monthly.
Confirm that invoices have been entered only once, payments have been applied correctly and overdue balances are being addressed. Amounts owing to suppliers should agree with supplier statements where those statements are available.
Review Payroll Records
Payroll expenses, source deductions and employer contributions should be recorded in the accounting system.
The payroll records should agree with amounts paid to employees and remitted to the Canada Revenue Agency. Differences in payroll liability accounts should be investigated rather than carried forward indefinitely.
Changes involving wages, bonuses, taxable benefits or shareholder employees may require additional consideration.
Review GST
The GST collected on sales and GST paid on eligible business expenses should be reviewed before the return is filed.
Check whether:
- Sales have been recorded using the correct GST treatment
- Input tax credits are supported by appropriate documentation
- GST has been recorded on major purchases
- Personal or exempt expenses have been treated correctly
- The GST balance agrees with previously filed returns and payments
Completing this review monthly can make quarterly or annual GST filings considerably easier.
Record Loans and Equipment Properly
Loan proceeds are generally not business revenue, and the entire loan payment is generally not an expense.
Loan payments may include both principal and interest. Equipment purchases may need to be recorded as assets rather than current expenses. These transactions should be identified and recorded correctly so the financial statements and tax records are reliable.
Review Shareholder Transactions
Payments between a corporation and its shareholders should be clearly identified.
Personal expenses paid by the corporation, funds advanced to shareholders, shareholder contributions and reimbursements may affect the shareholder loan account. These amounts should not be left in general expense accounts without review.
Maintaining accurate shareholder records during the year can prevent significant questions and corrections at year end.
Review the Financial Reports
Once the accounts have been reconciled and transactions reviewed, examine the balance sheet and income statement.
Compare the results with the previous month, the same period in the prior year and the business budget, if one exists.
Look for balances that appear unusual, including negative asset accounts, old receivables, unexpected changes in expenses, large amounts in miscellaneous accounts or liabilities that do not appear to be clearing.
Financial reports are most useful when the underlying bookkeeping is current and accurate.
Make Bookkeeping a Regular Process
Monthly bookkeeping does more than prepare a business for tax filing. It provides timely information about cash flow, profitability, customer collections, expenses and financial obligations.
A consistent process can also reduce year end corrections and allow the accountant to focus more attention on financial reporting, tax planning and business advice.
Seniuk & Marcato, Chartered Professional Accountants provides monthly, quarterly and catch up bookkeeping services for businesses in Edmonton and throughout Alberta. Our team can assist with reconciliations, transaction recording, GST, payroll accounting, QuickBooks Online and preparation of accounting records for year end.
If your bookkeeping has fallen behind or is taking too much time away from operating your business, contact Seniuk & Marcato at 780 482 3431 to discuss the assistance you require.
This article provides general information only. Accounting and tax requirements vary according to the circumstances of each business.
