As a small business owner, what is your vision for the next five years? To reach your goals, you must first overcome some challenges. Competition is one of the biggest challenges to small businesses like you. However, with the right tools and people in your corner, you can lead while others follow.
Adopting a well-organized accounting process by bringing in an accountant will help your business reach its goals. This can help you organize procedures in collecting, processing, and sharing financial information with minimal stress on you. However, there are options when it comes to choosing an accountant like whether you should find a year-end or month-end accountant.
In this article, we will cover what each option entails and which one is better.
Year-End Accounting Processes
Year-end accounting processing is the process of inspecting and updating accounting records at the end of a year. This kind of accounting requires the accountant to look back through all of your business’s financials for the entire year and make sure all the records accurately reflect your company’s financial standing.
Year-end accounting includes:
1. Gathering and Analyzing Financial Statements
A business's financial statements are its heart. These statements help maintain a healthy financial position. By using your business financial statements, your accountant can help you make plans for the future.
Income statement: Your business income statement shows your total expenses and revenue.
Cash flow statement: It indicates your business's incoming and outgoing cash. It shows actual money, not credit.
Balance sheet: A balance sheet is important to your business. It shows your business's total liabilities, assets, and equity.
2. Account for Inventory
Year-end accountants can help estimate the total value of your remaining stock. They will also help determine the depreciation value of old or damaged items. If there are discrepancies between your balance sheet and actual inventory, your accountant can make the necessary adjustments.
3. Reconcile Bank Accounts and Credit Cards
A year-end accountant can help confirm that your accounting records match your business bank account. If there are any inconsistencies, they can help determine why.
4. Review Accounts
Before your financial year ends, it’s important to settle all collections and debts. An accountant can help do this by reviewing your accounts payable and receivable. With accounts receivable, they will look for past due invoices, and with accounts payable, they will look for any overdue bills on your end.
5. Back-Up Information
Accountants will store your data year after year so you have a consistent stream of records for reference. However, as a year-end accountant, they will only be backing up your data once a year. If something happens halfway through the year, it will be up to you to determine the problem and track down old data.
Monthly Accounting Processing
Monthly accounting balances financial records before the start of a new month. Below is a list of some tasks a monthly accountant will help with.
1. Record Daily Operational, Financial Transactions
Every organization's goal is to get timely and accurate financial statements. To get correct monthly accounting records, a month-end accountant will gather and record every transaction at the end of each month. This will help you avoid delays at the end of the year.
2. Record Monthly Journal Entries
To get accurate accounting records, your accountant will record monthly journal entries. Such journals include depreciation, accrued expenses, amortization, among other activities.
3. Reconcile Balance Sheet Accounts
Reconciling cash accounts will help you locate incorrect or missing entries. Your month-end accountant will also make the necessary adjustments and then negotiate the balance sheet.
4. Review Revenue and Expense Accounts
Your month-end accountant will review your expenses and revenues, and ensure they get recorded correctly and are attributed to the correct accounts every month.
5. Prepare Financial Statements
When your general ledger is accurate, you can prepare more complete financial statements. Your accountant can use your financial information to compare the actual and budget.
6. Close the Accounting Systems for the Month
Your month-end accountant will close your financials every month, compared to a year-end who only does this at the close of every year. Doing this on a monthly basis helps keep everything organized and ensures nothing is missed.
Year-End VS. Month-End Accounting: Which One Is Better?
Monthly accounting is the best option for small business owners who want to keep their finances and business as a whole in a healthy standing. Not only do you have a certified professional looking over your financials, but you also have a knowledgeable business advisor who can help you make important decisions.
Here is why you should use monthly accounting records. You will be able to:
- Keep track of your business’s financial performance
- Compare estimated and actual budget
- Benchmark your business's actual and expected performance
- Make short-term and long-term business plans
- Curb risks by tracking business goals
As a small business owner, you can't survive without well-kept financial records. And, only having eyes on your financials at the end of every year doesn’t give you the insight you need to make informed decisions. Hiring a month-end accountant will ensure you have eyes on all the important information so you can make the best decisions for your organization.
At Schwartz & Associates, we provide expert solutions for your business financials and help coach you through the challenges of being a small business owner in South Jersey. Reach out to us today to take the first step in organizing your financials.