Are you looking for ways to make your fashion startup operate better than ever? Yes, it is important to declutter your warehouse, shred and recycle old customer orders that are no longer needed and do an inventory check, but have you thought about your company’s financial health? It is absolutely critical to clean up your fashion business’s finances and ensure that all of the accounting is accurate and up-to-date.
Taking a good look into your startup’s accounting could help you think of new ways to cut unnecessary costs, generate more profits and improve your overall financial health. This, in turn, will help you enhance your business’s success and ensure it stays prosperous in the long run. That said, check out these must-know tips on ways to clean up and improve your fashion startup’s accounting.
Finalize Journal Entries
As a fashion entrepreneur, you are well aware of how vital it is to document all of your company’s daily transactions. Bookkeepers use journal entries to book many of these entries. Doing this helps you keep track of your business purchases, sales, invoices and payroll, which gives you a clear overall depiction of your startup’s financial standing. Take the time to meet with your bookkeeper, and review/record any pending accrual/deferral journal entries. Recording backlogged entries will provide more accurate financials so that you can make more informed decisions and better safeguard against any unforeseen financial issues.
Document Your Receipts
Do you sometimes take your buyers out to dinner to discuss business plans? Do you have to regularly ship products to customers and make frequent office supply purchases? If so, make sure that every single receipt is accounted for and properly documented. In the event of a business audit, proper record keeping and documentation will make the whole process go a lot smoother. Taking initiative by recording your receipts could save you a lot of unneeded stress later down the line.
Check Balance Sheet Statements
It is pertinent to review your business’ profit and loss and balance sheet statements to verify that all entries were booked correctly. Sometimes, we can be in a rush and accidentally record transactions in the wrong general ledger account. This mistake can create inaccurate financial statements, which can later create challenges during the next tax season. With this in mind, take the time to review your startup’s financial statements to keep all transactions accurate. You cannot skip this step!
Bank Reconciliations
In order to keep your fashion company’s financials in order, perform bank reconciliations for each month. Conducting bank reconciliations will keep your bank balances in order and ensure that every transaction is accounted for. In doing this, you may find that you were charged twice for a company purchase or that there is still an outstanding invoice that needs to be paid.
Examine Your Budget
While cleaning up your business’s finances, analyze your budget versus actual expenses, and take corrective action where there are large variances. You may find that you no longer need monthly subscriptions to certain software programs, excess file storage and other expenses that eat away at your bottom line. Understanding the variances between budget versus actual expenditures will help you take corrective action in future periods. This, in turn, will improve your overall financial decision-making.
Close Your Monthly Financials
To properly balance your fashion business’ checkbook, close your monthly financials up to the most recent month. If you don’t keep up-to-date financial statements, you will run your company blindly and be completely unaware of any possible financial issues. Having up-to-date financials provides relevant information to you and other key decision makers in your company so that you can keep progressing into new levels of success.
As a fashion startup owner, you must have a solid grasp of your company’s financial health in order to make the best business decisions you can. Therefore, clean up and organize your enterprise’s financials by finalizing journal entries, documenting all receipts for expenditures and reviewing your profit and loss and balance sheet statements. Also, make sure to perform bank reconciliations, examine your budget versus actual expenses and close your monthly financials. Taking all of these steps will help ensure the long-term growth and prosperity of your business. For startups with a budget, it is recommended to outsource or hire internally a professional bookkeeper to ensure all of the above points are maintained on a monthly basis.
Nathan Liao is the founder of CMA Exam Academy, a top Certified Management Accountant (CMA) exam review program. Liao mentors accounting and finance professionals in over 80 countries. Find out more at cmaexamacademy.com.
