Page 160 - Budgeting for Managers

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Tracking Your Budget
payable, we compare our records to invoices we receive from
clients and checks we sent out to them.
There are three important reasons why a business should
close its books every month:
• If there are any missing records or errors, we catch and
fix them while we still remember what we did.
•By reconciling accounts, we ensure that money is going
where it’s allocated. This makes it more difficult for any-
one to embezzle—that is, to take money from the compa-
ny illegally and hide the transactions by changing
accounting records.
•Reconciling the accounts each month shows us what
work we need to do to keep our business running well, as
we discuss in the next section.
Follow-up Work
To run a business well, we need to do more than just know
where our money is. We need to do work to get the money into
the right place. First, let’s look at some small jobs we can do
while closing accounts, to keep the money moving through the
company:
• Billing. We make sure that we’ve billed our clients for all
completed work, increasing accounts receivable, an asset.
• Collections. We examine our accounts receivable aging
record and do what we can to collect unpaid bills. An
aging summary shows how much money is past due from
customers. The aging detail report shows the customer
and invoice numbers, allowing you to call or mail cus-
tomers and ask for payment. The accounts receivable or
collections department may do this or it may be part of
your job to collect from the customers of your department.
• Renewing petty cash and transferring money. We add
money to petty cash so we’ll have enough for the next
month. We make sure that we have enough money in the
checking account by moving money from savings or, if