Balancing at the End of an Accounting Period and Reviewing your Business Budget

by Wilke & Associates, CPAs

To obtain a clearer vision of your current business budget, its best to reconcile your account(s) or “close your books.” Many businesses make it a practice to reconcile at the end of an accounting period – monthly or quarterly, however, it is best to keep an accurate pulse on your financial reporting weekly no matter the size of your business. As businesses continue to grow at a rapid pace, handling the financial close process can be challenging at times, but it should not be regarded as a hassle.

If you are using an online accounting product from Intuit (QuickBooks) or Sage, this will be an easy endeavor. If you are still using manual bookkeeping and or excel spreadsheet, we strongly recommend upgrading to an electronic form of bookkeeping to avoid errors and to have financial information easily attainable. You can also engage with a professional accountant, or general ledger account manager, who can verify that balances are correct and accurate and maintain other independent sources of data, such as bank and credit card statements. And remember, balancing late night is stressful and leads to discrepancies!

Importance of KPI’s

With this reconciled information you can compare budget to actual information that you track on your Dashboard of Key Performance Indicators (KPIs) through the end of your fiscal year. Effective KPIs will be simple, aligned, relevant, measurable, timely, visible and above all achievable.

You can create KPI Dashboards on a macro level to track Billing Summaries, Work in Progress, Accounts Receivable Recaps or Aging, and even a Five-Year History. On a micro level, it is common to track Effective Earnings per Hour, Realization per Hour and Earnings per Hour. This will help you budget and plan for the second half of the year to increase or decrease pricing, make team changes, engage in an effective marketing promotion, or consider other vendors to negotiate better material costs.

Utilizing dashboards to manage your daily, weekly, monthly operations, you will be able to pivot quickly to make decisions. You will have data to choose what is best for daily operations, make changes for monitoring and mid-year budget variations and to position your company for long-term decisions like succession or exit planning.

It is important to use the correct and real data to make good decisions about the 2nd half of the year. If gross margins, payroll, and payables are not what you expected you can make wise decisions now. We recommend an honest consultation with your trusted business advisor or CPA.

Recommendations of Budgeting Tools

If you are considering online budgeting tools, look into these recommended by QuickBooks:

1. Mint
2. BudgetPulse
3. SavvyMoney
4. BudgetSimple

Sage Software also has a budgeting and planning module in their platform.

Read our Tax Planning Newsletter and see other considerations you may want to include in your mid-year budget review.

Contact your trusted Wilke & Associates CPA or Business Advisor today for a mid-year budget checkup.