What Can You Learn in 10 Minutes?

I was talking with a business owner recently and mentioned that September is when I start thinking about getting ready for tax season.

“Tax season? Already? Isn’t that a little early?”

It may seem a bit early, but when you think about everything that happens between September and the end of the year, there’s a lot going on.

Fall arrives. Then comes the year-end push to finish strong. Add the holidays, family activities, school and sports schedules—not to mention everyday life—and suddenly there just aren’t enough hours in the day.

That's when some of those things we were going to take care of “next week” have a way of falling through the cracks. Bookkeeping can easily become one of them.

So I suggested a simple habit: take about 10–15 minutes once a month and give your books a quick eight-point check.

This isn't a complete review of your books, but it's a good place to start. You don't have to be a bookkeeper, and you're not trying to audit your own books. You're simply taking a quick look for anything that raises a question in your mind or may deserve a little more attention.

Most of what you need for this quick check can be found in a few basic reports from your bookkeeping software or whatever records you use to keep track of your business finances.

Some of the reports or terms below may not be familiar to you, and that's okay. Have a bookkeeper? Ask them to walk you through the reports the first time. Don't have one and aren't sure where to find the information? Ask me. I'll be happy to help you figure out where to look at no charge. You can reach me through the consultation link on my website.

Here’s What to Look At

Start with your Reconciliation History

1. Bank and credit card accounts

Check when each bank and credit card account was last reconciled. Ideally, each should be reconciled through its most recent statement. If an account is behind, make a note of it.

If you invoice customers, check Accounts Receivable

2. Money customers owe you

Open your Accounts Receivable Aging report. Are there invoices that are 30, 60 or 90 days old? An older invoice may simply need a reminder, but it's worth knowing the money is still outstanding.

If you enter bills, check Accounts Payable

3. Money you owe

Open your Accounts Payable Aging report. Do you see old bills you thought had already been paid or anything overdue that surprises you? Those are worth checking.

Now open your Profit & Loss

4. Does the overall picture make sense?

Does the income seem reasonable for the business you did? Is an expense much higher or lower than you expected? You know your business better than anyone, so pay attention to anything that raises a question in your mind.

5. Are there transactions that still need attention?

Look for Uncategorized Income, Uncategorized Expenses, or other categories that appear to be holding transactions temporarily. A few recent items may simply be waiting for review. A growing balance is worth asking about.

Finish with your Balance Sheet

6. Do your loan and credit card balances make sense?

Compare them with your most recent statements. A significant difference doesn't necessarily mean something is wrong, but it's worth investigating.

7. Does the money you've put into or taken out of the business make sense?

Look for Owner's Equity, Owner's Contribution, Owner's Draw, or similarly named accounts. The names will vary depending on how your business is set up. You're simply looking to see whether the amounts seem reasonable based on what you know you've put in or taken out.

8. Does anything else raise a question?

Give the rest of your Balance Sheet a quick scan. Look for unexpected negative balances, accounts you don't recognize, or numbers that simply make you wonder, “Why is that there?”

Also take a look at your fixed assets—things such as equipment, computers, vehicles or other larger business purchases. Have you bought, sold or disposed of anything that isn't reflected there?

If your books include accumulated depreciation, make sure your bookkeeper or tax professional knows about any changes so the records can be updated appropriately. You don't need to know how to calculate depreciation yourself. You're simply making sure the people who handle it have the information they need.

That's It

You may have found something that raised a question, or everything may have looked just as you expected. Either way, you now know a little more about what's happening in your books.

If something did raise a question, now is a good time to find the answer. There may be a perfectly reasonable explanation. You can investigate it yourself, ask your bookkeeper, or get some help if you need it. And if everything looks good? Great. Ten or fifteen minutes well spent.

Better yet, make this a year-round monthly habit. Questions are usually easier to answer while the information is still fresh, and small issues are much easier to address before they have months to accumulate. By the time everyone else starts thinking about getting ready for tax season, you'll already have a head start.

Ten or fifteen minutes now could save you quite a bit of time — and possibly some unnecessary expense — later.