Why and what to look for when doing a self-audit on your books.
If you are doing your bookkeeping, you need to double-check all the numbers are valid for taxes. A self-audit monthly, quarterly, and (definitely) annually is a great way to make sure everything is correct. It’s easier to fix issues as they arise and not at year-end.
Steps for a great audit:
- Start with your balance sheet. Make sure all the bank account, credit card, and loan assets match the latest statement balances. Your assets should correctly reflect the real account balances.
- Next, review you’re accounts receivable (A/R) and accounts payable (A/P) reports. A/R should be a small amount and less than 30 days outstanding. A/P should also be small and about 30 days due. I keep my receivables to about ten days. I have already done the work. I want to make sure I get paid.
- Did you make any asset purchases over $1,500? New laptop, office furniture, etc. You will need them on the balance sheet with documentation attached.
- Check your vendors for duplicates. Do you have an IRS vendor and an Internal Revenue Service vendor?
- Make sure vendor names are on all banking transactions. It will be much easier for you to look up payments and make sure all the expenses are consistently posted to the same expense account. Example: Dropbox monthly payments. Did you post them to Dues and Subscriptions or Software? Just be consistent.
- Look at your contractor expense line. Are all the vendors that are providing services have W-9’s with you? You will need their information for 1099-NEC’s at the end of the year. Get the W-9 now, don’t wait until January. You should make sure you have the W-9 before you pay them anything. Some contractors run as soon as they are paid because they do not want their income reported to the IRS. W-9 first or no payment.
- Run your Profit and Loss Report for the whole year by month. Look for straight-line expenses and is anything missing. Example: Do you have rent for each month? Do you have interest from your loan booked monthly? Cell Phone? Internet?