A look at the accounting process

August 15, 2019 -  By
Computer with charts (Photo: iStock.com/utah778)

Photo: iStock.com/utah778

Ever wonder what an accountant in the landscape industry really does each month to produce accurate financial statements that give an accurate picture of how a business is performing? It all begins with recording transactions and ends with closing the books.

During the month, you record these transactions:

Revenue:

  • In your routing or operational software, you create work orders that get posted into customer invoices, which become accounts receivable. The invoice records the type of service the customer receives as well as the proper sales tax where required.
  • When the customer pays, a payment is recorded, which relieves the account receivable. These payments are batched together and deposited to the bank.
  • These customer charges, payments and accounts receivable are brought over to your general ledger software — such as QuickBooks — in batches so all revenue for the period is broken down by service code, division type and branch location for presentation on the profit and loss statement (P&L).
  • Sales tax is accumulated in your routing or operational software and recorded as a liability in the general ledger software that will show up on your balance sheet and is relieved by paying the government.

Expenses:

  • Purchases are made. Materials are ordered from your distributor, delivery is verified and the vendor issues his or her invoice. That invoice gets recorded in your accounts payable system. It is either keyed into the computer or quickly scanned and recognized through artificial intelligence. The expense is properly coded, and the amount is properly recorded in the accounts payable system.
  • Vendor payments are made by recording checks that relieve the accounts payable balance. Many of our clients use Bill.com that we administer, which gives them a dashboard where they can “click off” vendors to pay, which saves a tremendous amount of time avoiding check printing, stuffing, etc.
  • Payroll is entered using a payroll service, ensuring all employees are properly coded by department and payroll taxes are recorded and transferred to the general ledger.

Month end:

  • Reconciliations of the routing or operational software balances are done, including revenue, payments and accounts receivable to the general ledger program to ensure integrity of revenue numbers.
  • Reconciliations are performed for each cash account, loan account and credit card accounts. This process ensures that the balance we believe is correct coincides with what the bank, finance companies and credit card companies show as their balances.
  • Month-end journal entries are posted to record interest, depreciation and other accruals.
  • Trial balance is printed to ensure P&L and balance sheet accounts are correct and look reasonable. Where there are anomalies in balances, they are researched and confirmed or corrected.
  • A financial and operational report package is created once all the above work is completed. This package includes the P&L, balance sheet, statement of cash flows as well as operational and other financial dashboards.

As your firm grows, there are several other aspects of management accounting that should be explored and implemented. But the firm that successfully uses the principles of management accounting outlined above will accumulate much more in terms of wealth than the firm that operates by shooting from the hip.

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