A 5-Point Financial Health Check for Small and Medium-sized Business (SMBs) Owners
By Kapez Sakala | Scarlett Technologies LLC | Fractional CFO Specialist, 25 Years Experience
Most small business owners have no idea whether their books are accurate until something forces the issue. This could be a tax filing, an audit request, a funding application, or a frustrated CPA.
By then, the cleanup is expensive, stressful, and urgent.
This guide gives you a simple self-assessment so you can find out now, on your own terms.
Every bank and credit card account should be reconciled at least monthly. This means your accounting software matches your bank statements to the penny, with no unexplained differences.
If your last reconciliation was more than 60 days ago, or you have never reconciled, your books are not reliable.
Zero unreconciled transactions. Your bank balance matches your statement balance every month-end.
Every dollar in and out of your business should be assigned to the correct account. Miscategorization is the number one source of inaccurate financial statements.
Large amounts in "Uncategorized" or "Ask My Accountant." Personal and business expenses mixed together.
Every transaction categorized. Personal expenses fully separated. Your chart of accounts matches your business model.
If your books are in order, pulling a Profit & Loss or Balance Sheet should take seconds. If it takes days, or the numbers do not look right, that is diagnostic.
You avoid looking at your financials because they "do not seem right." Your accountant always makes adjustments before filing.
Clean, accurate reports on demand. Your CPA reviews, not reconstructs, your financials at tax time.
Payroll liabilities, sales tax collected, and contractor payments (1099s) are among the most audit-sensitive areas. Errors here attract IRS attention and generate penalties fast.
Payroll liabilities that do not match what you have paid. Contractors paid over $600 without 1099s. Sales tax filings behind.
Payroll taxes filed on time every period. 1099s issued by January 31. Sales tax reconciled to the dollar.
Each fiscal year should be formally closed. You should have no prior-period adjustments open. Your tax return matches your books. Opening balances for the new year are clean.
Still making changes to last year's books. Accountant found "discrepancies." Multiple years open simultaneously.
Prior years locked in your software. Tax return agrees to books. Clean opening balance sheet for current year.
If you answered "red flag" to any of these five points, your books need attention. The good news: we fix these issues for a living.
Ready to assess your financial foundation? Schedule a consultation with our team.