Checklists for the Small Business Owner
As a business owner, your time is precious. That’s why you likely rely on a bookkeeper to keep your financial records clean and organized. But how do you know if your bookkeeper is doing everything they should to support your business’s growth and financial health?
This checklist will help you ensure your bookkeeping is in top shape. It includes things to look for immediately, tasks to review monthly, quarterly, and annually, and key questions to ask your bookkeeper to keep them accountable
Monthly Checklist
Each month, review these aspects of your bookkeeping:
Verify Financial Statements
Task: Ask for a Profit & Loss (P&L) Statement, Balance Sheet, and Cash Flow Statement.
Question to Ask: “Are there any unusual trends or discrepancies in the reports this month?”
Best Practice Response: Reports should match your expectations and highlight any unusual activity or trends.
Check for Timely Payment of Bills
Task: Review accounts payable to ensure no overdue payments.
Question to Ask: “Are all vendors paid on time, and are we taking advantage of early payment discounts?”
Best Practice Response: Your bookkeeper should confirm all bills are paid promptly or provide explanations for delays. Make sure they don't record a bill and then record an expense for that same bill payment. This error occurs very often.
Review Payroll Accuracy
Task: Confirm that payroll has been processed correctly.
Questions to Ask:
“Can you show me payroll reports to verify tax withholdings and payments?”
"Can you show me the payroll liabilities account, and show me that we've paid our liabilities?"
Best Practice Response: Payroll reports should show no errors or missed payments to the IRS.
Spot-Check Transactions
Task: Randomly review a few transactions for accuracy and proper categorization.
Question to Ask: “Can you explain why this transaction was categorized this way?”
Best Practice Response: Categories should be consistent and logical.
Hot Tip: Every expense must have a vendor name. Do not allow the recording of expenses without a vendor name. You will be severely hindered when trying to analyze your finances by vendor when trying to compare prices and costs by vendor. It will also add unnecessary challenges when reporting 1099's
Quarterly Checklist
Every three months, dive deeper into your financials:
Review Tax Filings
Task: Ensure that all quarterly tax payments are made (if applicable).
Question to Ask: “Have all tax payments been filed and paid on time?”
Best Practice Response: Your bookkeeper should provide copies of payments and filings for all payroll liabilities including quarterly tax payments for the owner.
Analyze Profit Margins
Task: Compare quarterly profit margins to past performance.
Question to Ask: “What trends are we seeing in profitability this quarter?”
Best Practice Response: Your bookkeeper should be able to provide insights and flag areas of concern like irregular spending in certain categories or unrecognized deposits or expenses.
Check Vendor and Customer Balances
Task: Review accounts receivable and payable aging reports.
Question to Ask: “Are there any overdue invoices or unpaid vendor bills?”
Best Practice Response: A strategy should be in place to address overdue accounts promptly.
Confirm Compliance
Task: Verify compliance with tax laws, payroll regulations, and any industry-specific requirements. Many states require additional revenue reporting and Use-Tax filing.
Question to Ask: “Are there any compliance concerns we need to address?” "Has sales tax rates changed recently?"
Best Practice Response: Your bookkeeper should confidently confirm that all compliance is handled.
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Annual Checklist
At year-end, it’s time to assess the big picture:
Review the Full Year’s Financials
Task: Examine annual Profit & Loss, Balance Sheet, and Cash Flow Statements. Be sure to compare Year over Year.
Question to Ask: “Should we add or remove/consolidate any accounts to get more accurate reports?"
Best Practice Response: Your bookkeeper should present accurate reports and help identify areas for improvement.
Prepare for Taxes
Task: Ensure all documentation for tax preparation is organized.
Question to Ask: “Are we ready to file taxes, and is everything reconciled?”
Best Practice Response: Books should be fully reconciled and tax-ready with all 1099's ready to do by January 31st. Assets should be depreciated by the accountant and the Journal Entries entered by the end of February.
All asset and liability accounts should be reconciled annually at minimum. Quarterly is recommended.
Audit Internal Controls
Task: Review processes to prevent fraud and errors.
Question to Ask: “Are there any weak points in our financial controls?”
Best Practice Response: Your bookkeeper should suggest improvements, if needed. For example, is the bookkeeper writing checks and reconciling the accounts?
Hot Tip: Have someone not involved in check-writing reconcile the bank account regularly (monthly at minimum). This includes verifying that checks match the authorized payments and ensuring no unauthorized transactions occurred. You want to avoid someone having the ability to create vendor accounts and writing fraudulent checks or getting refunds on purchases deposited elsewhere.
4. Evaluate the Bookkeeper’s Performance
Task: Reflect on whether your bookkeeper has met your expectations. Are those in writing? Have you compared their performance to other candidates or industry standard?
Question to Ask: “What additional value have you brought to the business this year?”
Best Practice Response: A great bookkeeper should highlight efficiencies, insights, or improvements they’ve introduced like written procedures or policies that streamline their job.
