#bookkeeping #bookkeeper #reconciliation #accounting #profitandloss #balancesheet #incomestatement #xero #monthlyreview #quarterlyreview
I have been thinking about something lately. This is probably going to create some controversy, but I'm okay with that. Is there any benefit to monthly reconciliation and financial review? Is a quarterly review more beneficial? What about semi-annually or annually? Semi-annually and annually reconciliations and reviews are too far between to really make a proactive difference for a company. Monthly activities are helpful when there is a large volume, as it will reduce the time needed and possible errors during reconciliation. There is at least one reason to have reviews and reconciliations quarterly at the least: quarterly estimated taxes.
While there may be some benefit to a monthly reconciliation and review of financial statements to track profitability or variances in expenses, income, returns, etc., it may not be the most appropriate use of time and resources if a company's activities are not of the level to necessitate monthly reconciliations and reviews. There are many companies who need to take a detailed look to track profits on a monthly basis. Even those that are not well-established, especially if running on razor-thin margins.
For a company that doesn't have a high level of activity and at the same time does not have much or any concern with tracking income, I definitely suggest going the quarterly route. Not only does this help a business owner with tracking differences in profits, expenses, and return on investment over a more recognized financial/reporting calendar period, it greatly assists with making estimated quarterly tax payments.
There are many other reasons for choosing either of these methods (monthly, quarterly), but I really don't want to write a book today- and I'm sure you really don't want to read that much. Take this how you want, but as a professional who has dealt with both extremes- monthly and annually- I believe it is better to have quarterly reconciliations and reporting because it helps determine any potential seasonal factors for income and expenses. And it keeps quarterly tax filings top of mind.
Until next time.
- Tom