How To Do Monthly Bookkeeping?

Every thriving business, be it a small coffee shop or a multinational trade corporation, depends on a single foundation, which is strong financial record-keeping. While it seems like innovation and competitive market deals are what make businesses keep running smoothly, the actual success lies behind a structured bookkeeping process. For many small business owners and internal teams, bookkeeping can be demanding and overburdening, and often neglected until the eleventh hour. This not just leads to financial mishandlings, missed tax deadlines, and poor decisions, but also exposes individuals to legal complexities. The most productive way to minimize this stress and regain clarity over your financial health is to adopt a sustainable and consistent approach through a monthly bookkeeping cycle.

What Is Monthly Bookkeeping?

Bookkeeping is a systematic process of saving and organizing financial transactions. Many consider it the same as accounting; however, in actuality, it covers the critical numbers of entries and classifications that back every critical financial decision. Bookkeeping covers sales, purchases, receipts, payments, payroll, and other monetary activities, and it depends on businesses how often they run a bookkeeping cycle.

When bookkeeping is performed every month, it provides a true insight into a business’s financial performance to make sure that it never faces any unexpected circumstances like a sudden shortage of cash or a chaotic rush for documentation during tax season. Therefore, instead of waiting till the end of the year to assemble records, monthly bookkeeping is a preventive mindset that keeps accounts always accurate and current. It is like maintaining your company’s financial health through small and consistent efforts that result in enduring success.

Setting Up Your Bookkeeping System

Before you start working on a monthly bookkeeping cycle, it is important that you build a robust system in line with it; inefficiencies in the system can result in only wasted time and errors.  Hence, it is crucial to analyze your system thoroughly.

1. Separate Business and Personal Finances

The first and foremost step is to open separate bank accounts and credit cards to manage your company’s finances and to avoid them merging with personal transactions. Using a single account to manage both financial and personal finances is the fastest way to face challenges in bookkeeping, endanger your corporate protection, and invite legal authorities for questioning. Businesses must keep their income and expenses in distinct accounts for better clarity.

       2. Choosing Your Accounting Method

To record the transactions, two general methods are used, which impact on the monthly bookkeeping procedure.

1. Cash Basis Accounting: These transactions are recorded when you receive a payment considered as revenue and when you pay your bills considered an expense. This method is straightforward and forward, yet it doesn’t represent the real financial standing of your company
2. Accrual Basis Accounting: All transactions are recorded in the form of revenues and expenses despite when they are received and paid. This method gives a clear picture of financial standing and an in-depth review of profits, gains, and losses. This is mostly recommended for companies that are expanding or those dealing with inventory management

     3. Implementing the Double-Entry System

The double-entry system is a modern-day business necessity. This principle represents that every single transaction impacts two accounts, one is a debit, and one is a credit, to make certain that all the accounting equations are balanced. The actual assets are calculated by:

Assets= Liabilities + Equity

Accounting tools facilitate the integration of double-entry systems, but having a clear understanding of how they operate is the key to reviewing all the final reports.

     4. Creating and Optimizing Your Chart of Accounts (COA)

The charts of accounts (COA) are an organized list holding the data of every single financial account in your business, be it assets, liabilities, equity, revenues, or expenses. A highly disciplined COA aids in the right classification and reporting. Such as, instead of having a single category for “Expenses,” you can divide it into various accounts like “utilities,” “office supplies,” “marketing,” etc. This not only highly assists in generating impactful reports but also helps in making thoughtful decisions.

    5. Selecting the Right Accounting Software

In this day and age, relying on manual labor leads to just blunders and is generally only suitable for very small operations. Any advanced business cannot run proficiently without investing in the right accounting software. Some of the reputable accounting tools include,

• QuickBooks: QuickBooks online is one of the widely used tools, specifically by SMEs, because of its smart features and ability to expand.
• Xero: Rewarding for mainly fast-growing companies, because of its simple and easy-to-use interface, strong bank feed connectivity, and the capability to integrate seamlessly
• FreshBooks: It is usually suitable for service-based businesses, freelancers, and consultants who prioritize time, invoicing, and project management
• Wave: This is free of cost and often utilized by solopreneurs or businesses with very small teams of 4-5 members. It also includes many advanced features.

Handpicking the best software is the key to processing the monthly bookkeeping cycle without any hassle. It automates transaction imports, categorization, and report generation and saves time and effort.

The Complete Methodology of the Monthly Bookkeeping Cycle

Step 1: Gather All the Financial Documentation

Monthly bookkeeping is done by gathering all the essential documentation that shows your financial activities for the given month, like sales invoices and receipts, purchase bills, bank and credit card statements, payroll data, claims of expenses, and loan documents. All these records are collected under a unified platform to ensure that there are no gaps. For companies utilizing cloud-based software, it automatically uploads most of these documents, while for some, you have to upload.

Step 2: Reconcile Bank and Credit Card Accounts

One of the most critical tasks of monthly bookkeeping is to reconcile accounting records with bank statements and ensure they match. This is done by checking each and every transaction on your bank statement against your accounting ledger. Verification of all deposits, withdrawals, transfers, and inspections of any breaches and mishandling. It not only helps in preventing errors but also keeps the company guarded against any fraud.

Step 3: Record All Income

Now is the time to log all the sources of revenues, which include sales from products or services, interest income, or rental income. Make certain that every transaction is in the right category in which the invoices are recorded. If a company is using any accounting software like QuickBooks, Zoho, or Xero, this entire process can be automated without any human effort or error. This step is mandatory to guarantee accuracy and transparency

Step 4: Record and Categorize Expenses

Keep track of every business expense made during the month, no matter if it’s paid in cash, by card, or through bank transfer. Sorting and classification of expenses to know where your money is going and to support tax calculations. The common expense segmentation includes rent or utilities, office supplies, transportation, advertising, salaries, and professional services. Storing digital copies is important for clear classification, and accounting apps allow scanning and saving every transaction for reference.

Step 5: Manage Accounts Payable and Receivable

It is important to keep a balance between AR and AP for financial stability. These reports help in monitoring which customers owe you money and which money you owe others.

• Accounts Payable (AP): These help track unpaid bills and supplier invoices. It helps in paying all the unpaid expenses on time to maintain a good relationship and to protect yourself from late fines.
• Accounts Receivable (AR): It reviews the invoices that are sent to the clients and creates follow-ups for any outstanding payments to keep the cash flow orderly.

Step 6: Review Payroll and Employee Expenses

Making sure that payroll processing is done accurately is also mandatory to keep track of monthly bookkeeping. Review that the salaries and benefits are computed with precision, deduction is made correctly, and expense reimbursements are recorded. Any payroll error also leads to compliance and financial issues.

Step 7: Update Fixed Asset Records

If any assets are sold or purchased, it is necessary to record them in an organized manner. Make changes to reflect current asset values and keep your sheet precise and compliant as per accounting standards.

Step 8: Review Tax Liabilities

Taxes also serve as a pivotal force in impacting the financial condition of a company. Therefore, companies must calculate tax obligations each month, like the VAT, Withholding Tax, Corporate income tax, or Zakat (if operating in KSA). All your tax records must be as per your accounting book. In KSA, filing VAT returns regularly is also essential to stay compliant.

Step 9: Generate and Review Financial Reports

Once all the entries are updated, organized, and clear, now is the time to generate the most important financial statements to determine your performance. These Statements mainly include,

• Profit and Loss Statement: It depicts your monthly earned income versus your monthly expenses
• Balance Sheet: This represents your monthly assets, liabilities, and equities.
• Cashflow Statement: This is to track moving money that is coming in and going out of your business.

These reports are highly valuable in giving a financial health checkup and facilitating intelligent decision-making.

Step 10: Close the Books for the Month

After the complete analysis, review, reconciliation, and verification of reports, it’s time to close your books. This safeguards you from any accidental changes and finalizes everything before moving to the next month. This disciplined mindset keeps you away from any serious outcomes.

Three Core Benefits of Hiring SS&CO for your Monthly Bookkeeping

Bookkeeping is not merely a process but a comprehensive framework that covers all business aspects, sometimes even non-financial areas. SSCOKSA accounting services in Saudi Arabia truly understand what it takes to build a strong financial structure for your company with monthly bookkeeping services. With us, you get,

1.      Improved Financial Transparency

Our expert ensures that all your finances are clear, and not even small areas are overlooked. We address any critical aspect that is impacting your business finances, and we implement the best strategies, like maintaining clear records and presenting a true financial picture to business owners.

2.      Makes Smarter Business Decisions

We assist you in understanding that every action has a cost, and with our monthly bookkeeping services, you get a snapshot of your financial information. This helps in making the right decisions, keeping your budgets in mind.

3.      Increased Access to Investment and Growth Opportunities

Every business wants to expand its modest capital, and many owners usually do that by seeking loans and borrowing funds from investors to keep the business running and expanding. SS&CO helps you in obtaining these loads by offering clear financial records that investors can trust. Moreover, this also opens new doors of possibilities for securing capital.

Get in touch today and stay organized and compliant with SS&CO’s monthly bookkeeping services with precision and professionalism.