Why Mid-Year Financial Clean-Up Is Important
Before we start, you might be thinking, "Why bother now? Can’t I just do this at the end of the year?"
The truth is, cleaning up your financials mid-year gives you a clear picture of where you stand. You can catch errors early, streamline processes, and ensure compliance with all the new rules.
And what better time than Diwali to bring clarity and prosperity to your finances?
Step 1: Reconcile Your Bank Statements
First things first, reconciliation. This is the backbone of any bookkeeping process, and if you haven’t been doing it regularly, now’s the time.
How to Reconcile
Go through your bank statements and match them with your accounting records. Make sure every deposit, withdrawal, and payment is accurately recorded. It’s not uncommon to find small errors or missed entries during this process. And trust me, it’s better to catch them now than face discrepancies at the end of the year.
Pro tip: If you use automated accounting software, it will make the reconciliation process much smoother. These tools help you automatically import bank transactions and match them with your books.
Step 2: Check for Unpaid Invoices
As business owners, we all know the pain of unpaid invoices. They mess with your cash flow and can cause major headaches later. Diwali is a good time to review all your outstanding invoices and send polite reminders to clients.
How to Handle Unpaid Invoices
Make a list of all unpaid invoices and check how overdue they are. For recent invoices, send a friendly reminder to your clients.
If they’re really overdue, you might want to consider offering them a small discount for immediate payment. The goal here is to close as many open invoices as possible, ensuring you’re not losing out on any cash.
Step 3: Review Your Expenses
You’ve probably accumulated quite a few expenses over the past six months. Diwali is the perfect time to review them and see where you can cut back. Take a good look at both your fixed and variable costs.
How to Review Your Expenses
Categorize your expenses: rent, utilities, office supplies, travel, etc. Are there any expenses that seem too high? Are there any unnecessary subscriptions you’ve been paying for? Make a list of things you can trim down to boost your bottom line for the rest of the year.
Pro tip: Use expense management tools to track where your money is going. These tools can give you real-time insights and help you manage costs more efficiently.
Step 4: Evaluate Your Cash Flow
Now that you’ve cleaned up your invoices and expenses, it’s time to look at your cash flow. How much money is coming in? How much is going out? Is there a healthy balance?
Why Cash Flow Matters
Good cash flow is important for running your business smoothly. It allows you to pay your vendors on time, invest in new opportunities, and keep your operations running. If you notice a cash flow issue during your Diwali clean-up, it’s a red flag that something needs to change.
Quick Cash Flow Fixes
If your cash flow isn’t looking too healthy, you might need to take some immediate action. Consider cutting down unnecessary expenses, speeding up collections, or negotiating better payment terms with your vendors.
Step 5: Update Your GST Records
With GST being such an important part of Indian businesses, it’s vital to ensure your GST filings are up to date. Diwali is the perfect time to double-check your GST compliance and make sure everything is in order.
What to Check in Your GST Records
Ensure that all GST invoices have been filed correctly, input tax credits (ITC) are claimed accurately, and you have submitted all necessary returns. This will save you from unnecessary penalties and ensure that you are not missing out on any benefits.
Pro tip: Tools like Suvit’s GST ecosystem can help automate your GST filings, making this step a breeze!
Step 6: Perform an Inventory Check (If Applicable)
If you’re in a product-based business, doing an inventory check mid-year is essential. You need to know what’s selling, what’s not, and whether there’s deadstock sitting around. This insight can help you make better purchasing decisions for the second half of the year.
How to Perform an Inventory Check
Review your stock and match it with your sales records. Make sure there are no discrepancies between what’s physically available and what’s recorded. If you find items that aren’t moving, consider offering Diwali discounts to clear them out and make room for newer, faster-selling products.
Step 7: Set Financial Goals for the Rest of the Year
After doing a thorough clean-up, now’s the time to set new financial goals for the second half of the year. Whether it’s increasing your revenue, cutting down on expenses, or improving cash flow, set realistic and achievable goals.
How to Set Financial Goals
Break down your goals into monthly or quarterly targets. Review your clean-up results and make a plan to improve areas where you’re lacking. For example, if your cash flow is weak, focus on improving collections. If your expenses are high, look for ways to cut down unnecessary costs.
Step 8: Back Up Your Financial Data
Now that your books are in order, don’t forget to back them up. This step is often overlooked, but it’s crucial to ensure that your hard work doesn’t go to waste in case of a system crash or data loss.
How to Back Up
Make sure you have both physical and cloud backups of your financial records. Many accounting software platforms automatically back up your data to the cloud, so take advantage of this feature.
Cleaning up your bookkeeping during Diwali may not sound as exciting as lighting diyas or bursting crackers, but it’s a task that can bring peace of mind and set you up for financial success.
Plus, starting fresh for the second half of the financial year will give you a sense of control over your business finances.
In the spirit of the festival, let’s not just clean our homes, but also tidy up our financials.
Happy Diwali and happy bookkeeping!
At Suvit, we believe that organized financial records lead to better decision-making and business success. Our accounting automation solutions are here to make your bookkeeping clean-up smoother than ever!
Try Suvit for free for a week!