When you’re on your own as a solo consultant, there’s no IT department to turn to, no admin assistant to rely on, and no co-worker to bounce ideas off of. And of course, when it comes to keeping track of your accounting records, it’s all up to you.
So how often should you step back and play the role of bookkeeper in your consulting practice?
“Every single month,” according to Denise Neamon, partner at Gaines Kriner Elliott LLP.
It’s hard to find the time when you’re in the midst of a major engagement, putting out fires and managing client expectations. But when you’re in the habit of monthly bookkeeping, it will become a rich source of valuable information for your consulting practice.
“Once you’ve been doing it for a year, you have comparative balance sheets to look at,” says Neamon. “Having all that historical data is a huge benefit for your business so you can see where you’ve been and where you’re going.”
That means facing objective reality, where money is concerned: What you’re earning, what you’re spending, and areas of financial strengths and weaknesses are right at your fingertips. Not only will you be able to more accurately project future income and expenses, but you’ll also gain a stronger sense of how to improve profitability. Do this, and answering questions like “should I be charging more?” becomes a lot easier.
So what should you be focusing on at month’s end? At a minimum, Neamon advises doing the following:
• Enter all cash receipts and disbursements
• Record any transactions in which personal funds were used for business expenses.
• Reconcile bank accounts and credit card statements to your ledger.
• Verify that the loan amounts on your ledger agree to what is owed to the bank and any other creditors.
• Review accounts receivable and accounts payable aging detail to verify all accounts are current and accurate . Pay vendors and make collection calls to customers as necessary.
• Run a balance sheet and profit and loss report , and review for accuracy.
• Ensure back up documentation (mileage logs and paper receipts) are in order.
Another bonus of monthly bookkeeping? Life will be a whole lot easier when it’s time to do your taxes.