Are you surprised to hear that GIGO might be applicable to your accounts as well?
Did you know the telltale symptoms are:
- You are working hard but do not have enough cash in your bank accounts.
- Your financials do not make any sense.
- Your cashflow is strained with VAT and various other vendor payments.
So, what corrective actions you can make to avoid GIGO applicable to your accounts?
First let me explain what is GIGO? GIGO is a well-known Computer terminology standing for “Garbage in Garbage out”. The data that you input in your computer system will determine the quality of output you get.
Surprised? GIGO is not only applicable for computer systems it is equally applicable for your finances. You will be surprised to know it applies to your mind as well.
If you want a successful outcome, you should have a total control over the inputs. Here are three steps to make sure that the financial data you feed in are accurate.
Step 1: Verifying the Quality of Input:
Most important and fundamental requirement is that your accountant is adequately qualified. He/She should be able to understand the basic principle of accounts. At the time of recruitment make sure he is capable. If you want to skip this problem you can always outsource your accounts to a professional. In case you are doing your accounts yourself or you are not confident about the job done by your accountant you can always get them validated by a professional at least quarterly.
Step 2: Monitoring the Quality of Input:
You should validate and review the below sections of your accounts monthly. You can outsource this to a professional.:
- Profit and loss accounts. -Make sure that you understand your profitability. Arrange to get a monthwise profitability report. Your Profit and loss report should be reviewed monthly.
- Cashflow– It is important that you understand your cashflow report. In a month you should make sure that your cash outflow does not exceed the inflow.
- Bank & Petty Cash Reconciliation: This is another control and a check point. You should make sure your cash and bank balance at the end of the month should tally.
- Sales overdue. – Receivables overdue by 30 days is a high-risk alert; you should make sure to collect all overdues ASAP.
- Payables– This should not be left to chance. If you expect your customers to pay on time, you should also pay on time.
Step 3:Maintaining the quality of input:
Another important aspect of having a perfect account is a perfect filing system. A proper form of segregation and filing help you track your finances. You need to file your documents based on:
- Bank Statement.
Need help? We at Beyond Numbers will always be there for you.