Help Your Clients With Mid-Year Report Reviews and Business Practice Assessments

By David H. Ringstrom, CPA

The middle of the year is an excellent time for clients to review their books and start planning for their current-year tax situation. Doing so enables you and your clients to be proactive, rather than reactive. In this article, I’ll discuss reports, processes and resources that you can suggest to your clients — including free small-business tutorials and templates from Microsoft.

Comparative Profit and Loss Report

Mid-year is an ideal time not only to look ahead at the current year’s tax situation, but also to compare this year’s results with last year. Microsoft Office Accounting makes prior-year comparisons easy:

1.      Choose Reports, Company and Financial, and then Profit and Loss.

2.      Click Modify Report on the toolbar, or press View, and then Modify Report Pane.

3.      Choose Columns in the Modify Report pane.

4.      In the Compare To section, choose Previous Year, as well as ($) Change and (%) Change.

Keep It Fresh: The report should refresh automatically as you make changes, but you can press F5 or choose View, and then Refresh Report to be sure.

5.      Once you have the report configured to your liking, click the Save Report button on the toolbar or choose File, and then Save As.

6.      Assign a name, such as “Two Year Profit and Loss,” as shown in Figure 1.

Figure 1: Save customized reports for instant access later.

Going forward, you can retrieve the customized report by choosing Reports, Saved Reports, and then Two Year Profit and Loss.

Drill Down: Many Office Accounting reports offer a drill-down capability that you can use to quickly dive all the way to an individual transaction. Simply double-click on any amount to work your way down.

It’s common to compare financial results from year to year, but your clients may not realize that Office Accounting also makes it easy to compare results from shorter periods, such as a week or even a day:

·         Choose Reports, Company and Financial, and then Profit and Loss.

·         Enter a date range in the From and To fields, such as 6/1/07 to 6/7/07.

·         Click Modify Report on the toolbar.

·         Choose Columns in the Modify Report pane.

·         Click Previous Period in the Compare To section.

·         As shown in Figure 2, Office Accounting compares the current week with the previous week.

Figure 2: Some reports can compare day ranges, such as weeks or half-months.

These comparative techniques also apply the balance sheet and cash-flow statement reports.

Trial Balance Review

In addition to comparative financial statements, your clients should also look over their trial balance report:

·         Choose Reports, Company and Financial, and then Trial Balance.

·         Once the report appears, double-click on any balance that looks off-kilter to see the underlying detail.

Here are a few common errors that I scan for:

·         Accounts with atypical balances:

o   Asset accounts with credit balances

o   Liability accounts with debit balances

o   Income accounts with debit balances

o   Expense accounts with credit balances

Such instances don’t automatically indicate bookkeeping errors, but they should catch the eye of anyone reviewing the trial balance

·         Accounts receivable or payable accounts out of balance with their respective aging report — users can purposely or inadvertently enter journal entries directly to these accounts.

·         Payroll liabilities with unusual balances — users sometimes post tax payments to expense accounts instead of the corresponding liability accounts.

·         A non-zero balance in Undeposited Funds — users sometimes forget to choose Banking and then Make Deposits when posting cash receipts.

I also recommend that the mid-year include the Reconciliation Detail report — choose Reports, and then Banking. Scan the reports for the last couple of months to ensure that the bank reconciliations are up to date.

 

It’s also good to review the GL Report — available under Company and Financial — for the year-to-date. Scan through the report and investigate any misposted or unexpected transactions.

 

Manage Accounts Receivable

Mid-year is also a good time for housekeeping and cleaning up accounts receivable in particular. The Write Letters feature on the Customer menu makes it easy to dash off collections letters to delinquent customers. If further collection efforts are futile, it’s a good time to write off the bad debts:

1.      Choose Customers, New, and then New Credits and Refunds.

2.      Select the customer in question.

3.      Click the Create From button on the toolbar, or choose Actions and then Create From.

4.      Select the invoice you wish to write off, as shown in Figure 3, and then click OK.

Figure 3: You can apply credit memos directly against outstanding invoices.

5.      Complete the memo and/or reference fields to document the transaction, and then click Save and Close. Doing so will eliminate the original invoice from the accounts receivable aging.

Online Resources

Among other features, the Microsoft Small Business Center provides an excellent series of Small Business Education Modules. Each module consists of a tutorial on a specific topic. For instance, the Sales and Marketing section includes:

·         How to convert sales leads into customers;
·         How to get more revenue out of existing customers; and
·         Creating cost-effective marketing materials.

There are more than 70 tutorials, including a section titled “Managing Cash Flow and Profitability,” which consists of the following topics:

·         Forecasting and improving cash flow;
·         Developing a budget;
·         Managing profitability;
·         Increasing sales;
·         Controlling expenses;
·         Managing inventory;
·         Managing your accounts receivable; and
·         Using your financial statements to manage your business.
In addition to guidance, many of these tutorials include templates and other tools available for immediate download.

Another excellent resource for your clients is the Finance and Accounting Articles and Insights area of the Microsoft web site, which includes success stories, product recommendations, webcasts and templates.

Speaking of templates, be sure to visit the Analysis Worksheets section of Office Online. Dozens of free worksheets — many provided by BearingPoint — are available for download, including:

·         Breakeven analysis;

·         Ratio analysis;

·         Capital budgeting/return on investment (ROI) analysis; and

·         Operating expense analysis.

Search tip: Hone in on the Microsoft site by adding “site:microsoft.com” to search terms in your favorite search engine. For instance, the keywords amortization table site:microsoft.com retrieve links to templates and formula tips related to creating amortization tables.

Finally, the third-party BizStats site is helpful for comparing your sole-proprietorship clients with others in their industry.

The views and opinions expressed in this column are those of the author and do not necessarily reflect the opinions of Microsoft.