I’m an idiot.
Seriously, sometimes I run around like a chicken with my head cut off and leave a bloodbath in my wake. Take yesterday, for instance. I had the opportunity to do a live training session in one of my Facebook groups and I totally blew it.
No, I didn’t forget about it or get the time wrong. I wasn’t unprepared. Despite some initial technical hiccups, it actually went well. Considering I’m an introvert who is still pretty uncomfortable with video, that’s a big feat.
Where I went wrong was later on. I was watching the replay on my phone and when it asked whether I wanted to post to the group (which I had already done on my laptop), I hit ‘Delete’ thinking it would re-post it to the group a second time. Since I didn’t want to look like I didn’t know what I was doing, I shot myself in the foot instead and ended up erasing the entire 23 minutes from existence!
I got so caught up in not wanting to appear silly or uninformed, I entirely missed out on an opportunity. My mistake, and one I won’t make again.
What does this have to do with today’s post? As I was scrambling around trying to recover my video feed, it occurred to me I was in ‘fix it’ mode. I was also in “panic” mode, which often goes hand in hand with the first one. I realized there was a good financial management lesson somewhere in the mess. What do you do when there’s a mistake in your accounting system?
Unlike my video misadventure, in terms of your bookkeeping, there is very little that can’t be fixed. Within reason. A lot of people I talk to are a little bit fearful of their finances, like the whole system might actually be a ticking time bomb, just waiting to go off when you least expect it.
I’m here to tell you it’s not. If you run a business, at some point you will have to face accounting mistakes. They may be a pain to deal with, but they are not insurmountable and nothing will explode if you admit it happened. So you can take a deep breath and relax, because it will be alright.
Case in point: one of my clients emailed me last week, terrified she’d messed up her whole system when she was trying to enter a payment against an invoice. She was worried that since it was now January, she wouldn’t be able to match it against a 2016 invoice. I very happily assured her that everything was a-okay and we jumped on a call to get it entered properly.
Timing really is everything!
So if you find yourself checking your Profit & Loss Statement and notice that the amount shown for your monthly utility expenses is triple what it normally is, don’t panic! All it takes is a little research to figure out which transactions may have been assigned to the wrong account. Many accounting programs even allow you to drill down on the details straight from your financial reports, so you can look at the entries immediately. You may find it was coded incorrectly or you may find it’s accurate and you simply forgot about that extra phone charge you incurred last month.
If the charge is legitimately in the wrong place, and if you are working in a current period that hasn’t yet been closed out, you can simply reassign the transaction to the correct account. Easy, right? Here’s where it can get tricky. If you find problems months later, or at year end, you don’t want to simply update the original transaction because it will throw your already-reconciled statements out of whack. This is why I recommend reviewing your financials at least monthly, so you have a better chance of catching any mistakes before you close out the period.
What if you’re finding tons of errors for entries earlier in the year? You’ll want to make corrections in your current time period. In this case, a journal entry moving a transaction value into the correct account may be your best option. This alleviates the sticky situation of changing a past entry and messing up your reporting. Most successful businesses regularly use their financial reports to make strategic decisions. Therefore, changing historic data can create confusion in your books, so remember to stay within your current open period. Once you’ve tied out your transactions, you will want to get in the habit of closing out the month so you’re always prompted with a ‘do you really want to do this?’ message when you’re trying to clean up an incorrect entry. It’s a reminder to double check your accounting dates.
Some accounting mistakes are harder to fix than others, but really nothing can’t be rectified in one way or another.
Most accounting mistakes are easy to fix…
…If you know what you’re doing. This is where I screwed up in my video situation. I didn’t ask for help. If you’re worried about your books and how to fix accounting mistakes, talk with someone experienced in business financial management. They can help you get set on the right track and show you how best to handle the inevitable keystroke or data entry errors that come up. None of us is perfect and there will be times you need to make adjustments in your system.
Checking your reports frequently can help you stay on top of data entry errors and learning best practices for fixing these types of problems is a great idea so you feel confident handling them in the future. The most important thing to remember? This is most likely not life or death for your business. In truth, while it can be aggravating to have to track down and rectify errors, there’s a big sense of accomplishment when you’ve gotten all of your numbers where they’re supposed to be. At least it is for me. You may not find it so exciting. And even though I just proclaimed myself an idiot and it’s clear that some things are not able to be fixed, just remember Bob the Builder’s mantra and know that in the world of business finance, nearly everything can be put back together.
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