One of the issues we regularly encounter with business owners is the issue of when to close off the accounts at the end of a period. All business owners and managers are keen to see their monthly management reports as soon as they can after the end of the month to get an idea of how the company is performing and whether it is reaching its targets. Of course, the sooner the bookkeeper can finalise those reports, the more valuable the information is so that if there is any alarming information you can quickly do something about it.
This becomes an issue when you receive suppliers' invoices relating to the previous month after you have printed off the management reports for that month. There is a happy medium here that must be met. If you close too early, you may be sacrificing accuracy for timeliness and if you close too late, your accounts will be more accurate however, historical information loses its value with time.
Some bookkeepers do not appreciate the importance of a "hard close" at the end of each month. They print out the monthly reports to give to the manager and then if any prior month invoices arrive late, they go and enter those in the previous month without re-running the management reports.
This may come as a bit of a shock to the manager when he looks at his year to date profit and loss and finds that the result is different from what he had anticipated. This can cause even bigger problems if the BAS has been lodged on the previous accounts and then they are altered resulting in a BAS that does not correspond to your accounts.
At Books Onsite, we find a good balance and benchmark for when to close off your monthly accounts. Usually, 7 days after the end of the month is a perfect balance as most invoices should be received by then and if they haven't you can make an accrual to include those costs.
Need to know more? Give Books Onsite a call today on 1300 2BOOKS or simply leave a message below and we can discuss all your business bookkeeping needs in simple terms which will allow you to fully explore your options.