This month, take a minute or two to look at your Chart of Accounts. Your Chart of Accounts is what translates into your Balance Sheet and your Profit & Loss Statement. Are you getting the information you need? Are your ratios comparative to last year even if Revenues are up (or down!)?
May is a great time to take a look at your Profit and Loss (also called Income Statement) Year to Date to determine whether your financials are giving you the feedback you require to make critical business decisions.
Your tax man or woman might have asked you to provide additional detail or information – that’s a good starting point. If you did not provide the information they needed to create your Tax Return this year, he/she will be asking for that same information again next year.
Your Chart of Accounts should reflect not only your specific business categories, but expenses allowed by the IRS. If you are unsure what to include, you can download a free Schedule C by visiting www.irs.gov to see allowable categories of business expense.
This is also a great time to do some comparatives – where were you financially last year Jan – April?
Run a Comparative Profit & Loss in QuickBooks (In Peachtree it’s called Income Statement 2-Year)
It’s not about how much income you have generated (at least in this case!) It’s about the percentages of income in regard to your expenses.
In other words, If your income last year for 1st Quarter was $200,000.00 and your Cost of Sale was 45% ($90,000.00) but this year your 1st Quarter income was $100,000.00 and your Cost of Sale was still 45% ($45,000.00), you should be okay.
It’s when costs remained fixed (and high!) as your income fluctuates that will lead to trouble – cash flow crises for one.
So take this month to do a Comparative and a Clarity Check. If you have any questions or would like help with either of these issues, Synthesis provides on-line accounting checkups and training. We bill in 15-minute increments. Contact us for more information.
Barbara Rogoff opened the doors of Synthesis in 1994 with one client and a great idea: give high-touch detailed service with integrity and consistency. After spending 20+ years in corporate as right-hand to three different CEOs, Barbara learned the importance of organization and keeping a sense of humor!
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