How do I Review The Books Prepared by my Team

Reviewing the account books of your clients can give you an understanding of how well their business is doing. This will help you understand if your bookkeepers are doing their work correctly and keeping your clients happy.

But how can you review books prepared by your professional bookkeeping team? Here are two tips expert accounting firm owners swear by:

  • When reviewing books prepared by your team, take a risk-based approach. Please consider the likelihood of inaccurate reporting and the possible effects of any mistakes made by the business, the sector in which it operates, and the market as a whole.
  • Every year, evaluate a business’s risks and try to identify such risks in the account books of the company. These risks can be the result of, for instance, economic conditions, changes in regulations, or the effects of new reporting obligations.

5 Tips for Reviewing Books Prepared by Your Team

Now that you know what to keep in mind while reviewing the books prepared by your team, here are some expert tips that can help you review your client’s books quickly.

1. Understand Financial Statements

When it comes to financial information, you may be well aware of all of it. But it helps if you revise things to prepare yourself for the review. As said, it’s essential to be able to understand financial accounts.

You may have become acquainted with several forms of financial statements. Some of the most crucial are:

  • Balance sheets: These records list an organization’s assets, liabilities, and owner’s equity and reveal information about the “book” worth of the business.
  • Income statements: Also known as profit and loss statements, or P&Ls, these records describe how much money a firm produced and spent within a specific reporting period.
  • Cash Flow Statements: These reports provide insight into a company’s cash flow through investing, operating, and financing operations.
  • Annual reports include a summary of a company’s financial performance for the previous year and a narrative to show how the company is doing with its ambitions and objectives.

Understand Financial Statements

Understanding all these terms will come in handy while you evaluate the books prepared by your team.

2. Financial Statement Analysis

Now that you have mastered the financial terms, it’s time to analyse the financial data in the books. Financial statements require an analysis if you want to derive meaningful value from them.

To gain a more in-depth understanding of a company’s financial situation, you may, for instance, utilise the data to compute important ratios or other financial indicators, such as gross and net profit margins, working capital, debt-to-equity ratios, and inventory turnover.

These analytical abilities can benefit you in many other facets of your job. Analysing a company’s books may help you assess its financial health and decide whether or not it is making the profits it claims to make.

It will also help guide your bookkeepers about the key metrics they should keep an eye on and suggest potential improvements that can help create a favourable environment for the business.

3. Run an Accounts Receivable Aging Summary Report

Do your accountants and bookkeepers use QuickBooks for invoicing? Run accounts receivable aging summary report. You need to check for the following:

  • Are all the company’s invoices on QuickBooks still outstanding?
  • Have any of them been paid?
  • Are there any open invoices from the preceding year?

This quick check helps you understand if payments and deposits were made properly into the accounting software.

4. Keep a Close Eye on Liabilities

Liabilities can be the most overlooked section on a balance sheet. You must also review the payroll recorded in the books. Keep an eye out for building balances, negative balances, or balances that do not go away for months.

Make sure that liabilities are not building up for the company. If it is, you should ask your bookkeepers why they are. So you can inform the company about remedial steps they can take. You may find the indicators of increasing liabilities in the account books quickly.

5. Don’t Forget the Equity Section of a Balance Sheet

While reviewing books, you need to check the equity section as well. It would help if you made sure of two things in this section.

  • Ensure that income is not being credited to an equity account.
  • Make sure that this section represents the owner’s contribution.

For example, if your client paid for a personal expense on their business card, make sure that the transaction appears here as a distribution and not as an expense done by the company. To figure out the equity section, you may also need to understand a business’s structure.

To Sum It Up

Reading or preparing financial statements, calculating return on investment, and forecasting the future requires you to interact with vast amounts of data. To leverage that data, you need to analyse it. Reviewing the books prepared by your team requires you to develop a data-driven mindset.

Combine the expertise of accounting software with the experience of your accounting and bookkeeping team, and you will be able to review the books prepared by your team faster and more efficiently.