Since it’s difficult for non-accountants to know whether a bookkeeper has done a good job or not, it’s useful to have a checklist to check the work they’ve done. This is my first attempt at putting together a monthly checklist that you can use to review some of the basics. If any of these things aren’t finished then you should question why.
- Are all bank accounts reconciled and any old outstanding items examined? You should be able to look at the reconciliation report and bank statement. Compare the “cleared balance” with the ending balance on the bank statement. Review the list of outstanding items to make sure there is nothing too old there, especially deposits. Deposits shouldn’t be outstanding for any more than a few days or something is wrong.
- Does the Accounts Receivable aging agree to the Balance Sheet? The aging lists each customer in detail and the total should agree to the total that appears on the Balance Sheet or Trial Balance. Any old receivables should be examined to see if they are valid or if they should be written off.
- Any additions to the Fixed Asset accounts should be documented. If a new piece of equipment or vehicle was purchased in the current month, the bookkeeper should have all of the paperwork related to that purchase such as the bill of sale and any financing/loan agreements. You may want to make sure the new asset is added to the depreciation schedule.
- Make sure the Accounts Payable aging total agrees to the Balance Sheet or Trial Balance. Any old payables should be reviewed to make sure they are valid.
- Any loans or notes payable accounts should be reconciled against statements from the bank or lender. If the balances don’t agree it’s usually because the payment wasn’t divided up between principal and interest properly.
- The balance in Retained Earnings should never change during the year, so it should be the same at the end of each month. The only time that it should change is the first month after the end of the year.
- Review the Income Statement, or Profit & Loss Statement. There should not be a large balance in accounts such as “Miscellaneous Expense” or “Suspense”. If there is a large balance in these types of accounts it means that the bookkeeper was either being lazy or didn’t know the proper account to post transactions to and didn’t bother finding out the correct accounts.
- There usually shouldn’t be any negative account balances. Sometimes there is a legitimate reason, but any negative accounts should be investigated.
- Does the Net Income (or bottom line) make sense? Most managers or business owners have a pretty good idea of what the profit should be and if the books show something completely different, then that discrepancy should be examined. Maybe the books are correct or maybe the owner really knows his stuff, but without checking you will never know.
This checklist certainly isn’t complete, and it doesn’t get into the more technical things. But if you go through these few things at the end of every month, your books will be in pretty good shape and you can have a little more faith in them.
