How to Perform Interim Financial Statement Check-up

By Ben Szweda

Mid-year is an excellent time for a check-up of your accounting records. Reviewing your finances can help you stay on top of potential red flags before they become a problem. This is also good to do before you consult your tax accountant about potential estimated tax responsibility.

a man performing a interim financial statement using a laptop and a document

Review your balance sheet

Most business owners review their P&L (Profit and Loss) Statement as they want to know their sales for a given period. This is undoubtedly a vital metric, but an equally important and often ignored report is the Balance Sheet. Therefore, it is a good idea to review this report to make sure that all the accounts listed can be explained. 

The majority of all balance sheet accounts should be supported by third-party documentation: payroll reports (in the case of payroll liabilities), loan statements (in the case of long-term liabilities), or bank statements (in the case of cash accounts).

(a picture of a table with a laptop and calculator aside from it is cash for payroll

A quick glance over the balance sheet helps you find line items that definitely need to be fixed. If you see the following accounts, the transactions within them will need to be moved elsewhere: uncategorized asset, uncategorized inventory, or opening balance equity. Any negative numbers on the balance sheet should also be investigated. 

If you have an account called undeposited funds, look deeper into this account if it has either a large number by it or a number that hasn’t changed in a long time. That’s indicative of a potential error. This one is important, especially if third-party software is synced to your QuickBooks account, as it can lead to overstated income. If not resolved, this can result in higher taxes. 

Also, make sure you have used the reconciliation feature within QuickBooks to reconcile all these balance sheet accounts: petty cash, bank, credit card, loan, and line of credit.

Review your Profit and Loss

Review your income and expenses for any anomalies. While we know this is a favorite report of business owners, most don’t know that you can view it by month. Edit the settings at the top of the screen to make a column show up for every month. This makes finding sudden changes easier.

a close picture of a container full of bundle dollar bills

As you move down the rows, watch for trends. For example, if a line item was $200 monthly, but then jumps to $600, or $0, you should have a reason as to why. There might not be any mistake, but explaining any large variance is an excellent way to ensure you know what is happening in your business. 

Finally, if you have any accounts by these names, click into the history and recategorize the transactions: uncategorized income, uncategorized expense, miscellaneous, suspense, reconciliation discrepancies, ask my accountant or other business expense. It’s hard to do a tax return when there are many uncategorized items, so if you need help clearing these up, reach out to your accountant.

Review AR and AP

First, review for anything really old. If there are bills or invoices in the 90+ day column, you should take some action. If there are any unpaid invoices, contact the customer and follow up with a formal letter reminding them of their obligation. You may not be able to collect the total amount owed if they ignore this request, but it will help minimize what you can’t recover. When you determine you can’t collect something, it’s time to move it to the bad debt account.

Close up picture of taxation papers with a calculator and a note saying need help?

It’s never too late to take a look at your financial statements and make adjustments to your bookkeeping practices for the next few months. Reviewing your balance sheet, P&L statement, and accounts payable and receivable, will help you stay on top of potential red flags before they become a problem. If these tasks make you feel overwhelmed, reach out to one of our interim financial statement experts to review your records and provide guidance in areas where you need assistance. We’ve helped lots of businesses and would love to help yours. 

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