Always Keep Financial Statements Accurate!

When I’m working with clients to improve their profitability, many times I find their financial statements are not accurate. This is a material problem and please let me explain.

Always reconcile the Balance Sheet accounts monthly.
Always reconcile the Balance Sheet accounts monthly!

According to Accounting 101 textbooks, if you reconcile the balance sheet monthly, your income statement has to be accurate. When I’m working with clients to improve their profitability, many times I find their financial statements are not accurate. This is a material problem and please let me explain.

When I worked in accounting, I always started a month-end closing by reconciling the company’s bank statement. I tied the bank balance into the cash account on the general ledger and booked any adjusting journal entries. Then next, I made sure that the accounts receivables trail balance agreed with the AR balance in the GL. If it did not balance, I reconciled the differences then made the appropriate journal entries. After that, I did the same process for every account on the balance sheet. I kept a general ledger analysis binder with the reconciliations of every account. I set up the binder with a divider between each account such as cash, accounts receivable, prepaid insurance, etc.

Always reconcile your Balance Sheet accounts monthly.

Before distributing the month-end financial package to management, I made sure that my balance sheet was 100% clean.

This process is extremely important to the accuracy of the income statement. Many controllers of small to medium-sized companies are lazy and do not reconcile their balance sheet accounts monthly.

Recently, I reviewed my client’s balance sheet with the controller. I asked him to show me the bank account reconciliation. I wanted to confirm that the reconciliation agreed with the GL cash balance. At the time, he did not have the cash reconciled, so I asked him to do it immediately. After reconciling the account, and posting the journal entries, income dropped by $50,000. Unfortunately, most of the adjustments were not good ones, meaning they decreased the company’s profits. Next, I reviewed the accounts receivable aged trial balance to the AR balance on the balance sheet. There was an unreconciled difference that needed to be resolved and adjustments made again. We ended up going through the same process with every balance sheet account, both assets and liabilities.

My client in this article is a $25 million dollar company with 75 employees. This problem could happen to any company, not just small businesses!

I know that most people find accounting to be boring. But if you want your monthly financial statements to be accurate, there is only one way to do it. The balance sheet accounts need to be reconciled monthly and adjusting entries must be booked. This process is especially true at year-end. If your balance sheet general ledger accounts are not properly reconciled, it causes a few problems. Namely, your year-end balance sheet, income statement and tax returns are all going to be wrong.

If your controller is not reconciling your balance sheet accounts monthly, then you have the wrong controller.

Reconciliating all the balance sheet accounts is a must!

My name is Robert Curry, and I am an Author, CEO Coach, Keynote Speaker, and Turnaround Specialist. Over the past 20 years, I have worked with more than 70 companies taking their businesses from Loses to Profits. Please click on the links below to read some of my other articles like this one.

Please click on the links below to read some of my other articles.

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Recently, I published two books: From Red to Black” and The Turnaround. Both books are true stories of real companies that I have turned around during my career. In both books, I shared all my secrets of growing sales, reducing expenses. I explain how to improve cash flow, and strengthen the management teams. If you would like to purchase either or both books autographed by the author, please click on the following link: Redtoblackbooks.com.

From Red to Black & The Turnaround
"From Red to Black" & "The Turnaround"


To our clients, past, present, and future:

I am Bob Curry, an author, and owner of CEO Results Coaching. It is incredible how often we hear a similar message and experience the same issues from new clients. Owners/CEOs feel like they are on an island with no one to turn to for advice. Unfocused employees are draining the company of its energy and funds, and sales teams have forgotten how to close deals. These clients say, in a desperate tone, “Bob, this just isn’t what I envisioned.” Our role is to refocus their efforts, so they can resurrect the original passion and vision that motivated them to start their company. The results, sales, and profits increase sales and profits, plus the ability to manage growth successfully.