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Developing Management Skill

-- The Art of Supervising Your Bookkeeper --

Its Relationship To Good Bookkeeping
and Accurate Financial Statements

There are many business management skills to learn when running your own business. Developing these skills will help you beat the odds of still being in business five years from now. If, however, you could only choose one skill to learn this year, let it be ...

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... the monthly financial review. But I can hear you saying, "I don't have to worry about that, I hire a bookkeeper." Or perhaps you are saying, "I don't need to do a review because I do all the bookkeeping myself."

In both cases, if you want to stay in control of your business ... and YOUR money, learn this good bookkeeping practice by performing the financial review each month.

This article will show you how to determine if your financial statements are accurate so that you can utilize them to make sound business decisions.

group of beans in reference to bookkeeping and bean counting Am I on track?

It's a good bookkeeping practice to put time aside each month to review your actual results with your budget. Why should you take the time developing your management skills in this one area of your business?

image of a person writing in a notebook by elwin

It keeps you aware of what's happening in your company.
You have the opportunity to develop and hone this skill set so you can converse comfortably with your bookkeeper or accountant.
It provides a yardstick to use when you review your financial statement account balances.
You can be proactive in addressing any potential problems or shortfalls ... and help prevent employee fraud.

group of beans in reference to bookkeeping and bean counting How accurate are my financial statements?

When developing management skills that will help you take control of your business finances, an important question to ask is "How accurate are my financial statements?". It's crucial to ask this question because YOU are making financial decisions based on the information contained in your financial statements.

The best way to answer the question, "How accurate are my financial statements?" is to perform a monthly financial review. Think of this as a tool available to you that will allow you to effectively develop and use your business management skills to run your business.

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one accounting bean

Let's Chat About ...

Two Basic Accounting Principles
Revenue Recognition and Matching Principles

A basic principle in accounting is to recognize revenue when the transaction is complete ... whether or not you have received payment. A sales transaction could be the sale of a product or a service.

If a construction or other long term project is involved, it is preferable to do progress billings (percentage of completion method) to recognize the work completed to a particular date.

The revenue recognition principle requires using the accrual basis of accounting instead of the cash basis of accounting. To understand this principle, it is important not to confuse sales revenues with cash receipts.

How do you now if you are using accrual based accounting? A good indication would be if you have recorded accounts receivable.

Another basic principle in accounting closely related to the revenue recognition principle is to match costs with revenues in the period the revenue was earned to fairly represent the operating results.

Costs are generally reported to match with revenues in two ways.

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In Summary

To review your financial statements, scan the reports for unusual balances. The more often you do this review, the more familiar you will become with the numbers for your business. The easier it will be to detect problems in their infancy or clerical errors that need correcting. Always ask yourself if the numbers are reasonable and do they make sense in relation to your business.

As part of your strategic plan, implement the monthly financial statement review. It will help you stay in touch with your numbers and reduce the potential for fraud in your business.

Business management skills like the monthly financial review ... every small business owner should learn. You can develop this necessary management skill by practicing it every month faithfully. Soon you will be a wizard at it.

Remember ... when you think of the monthly financial review, think ...

... Yeah I get to practice my business management skills! ... ;-)

Say it with me ... I like developing and practicing my management skills. ... Oh geez! I got so caught up with this topic that I forgot to drink my cup of tea. Sheesh!

Say it with me ... I like practicing my management skills.

Image of script writing saying,

P.S. You might like to check out these quick methods of calculating your profit and cash flow. Two great ways to keep your finger on the pulse of your business.

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Developing Management Skill

-- The Art of Supervising Your Bookkeeper --

Its Relationship To Good Bookkeepingand Accurate Financial Statements

The Training - Links

New! Comments

Get Your Password To This Page Here

Virtual Bookkeeper Training ProgramStep-by-Step Instructions

Just $77 USD

Should You Do Your Own Bookkeeping?Learn The Basics

Test Your Skill!Online Video & Exam$49 USD

Bought A ScanSnap?Now What?