Accurate financial statements protect you. They guide your choices, support your staff, and shield your reputation when questions come. When numbers are wrong, the damage spreads fast. Credit dries up. Tax problems grow. Trust with partners and donors fades. You need a clear process that keeps every report clean and honest. That is where a steady method matters. Westwood CPA follows four clear steps that reduce errors, catch risks early, and keep your records consistent month after month. Each step focuses on simple checks, clear records, and strong review. You see what is happening with your money. You can answer hard questions with calm proof. This blog walks you through those four steps, so you know what to expect from your CPA and what support you should demand. You do not need special training. You only need a clear process and the courage to insist on it.
Step 1: Gather and organize every record
You cannot have honest reports if pieces are missing. Your CPA starts by pulling every record that touches money. You help by making sure nothing is left out.
Common records include three groups.
- Bank and credit card statements
- Invoices, receipts, and payroll records
- Loan documents, grant letters, and tax notices
Next, your CPA sorts these records into clear buckets. Income. Expenses. Assets you own. Debts you owe. Equity that belongs to owners or your mission. Simple labels remove confusion and reduce wrong postings.
The CPA also checks for gaps. If a month is missing, they ask for it. If a receipt is unclear, they ask you to explain it. This step can feel slow. Still, it saves you from harsh questions later from lenders or auditors.
For basic record types and retention rules, you can review the guidance from the Internal Revenue Service on recordkeeping. It offers clear examples that match daily life.
Step 2: Reconcile accounts and fix differences
Once records are in place, your CPA compares your books to outside sources. This step is called reconciliation. It is simple. Your ledger should match your bank and your credit card company. When it does not match, something is wrong.
Your CPA checks three main things.
- Every deposit in the bank shows up in your income records
- Every payment leaving the bank appears as an expense or other entry
- Bank fees, interest, and refunds are recorded in the right place
When numbers do not match, the CPA tracks the cause. Sometimes it is a timing issue. A check did not clear by the month’s end. Other times, it is a miscode or a missing entry. The CPA corrects each issue and keeps a short note that explains the fix.
Consistent reconciliation does three things. It exposes fraud. It catches plain mistakes. It gives you a hard number you can trust before you sign a return or a loan request.
Step 3: Review, classify, and document each transaction
Clean books need more than matching totals. Each transaction must sit in the right place and carry a clear story. Your CPA reviews entries and makes sure they follow steady rules.
The CPA checks three questions for each group of transactions.
- Is the account correct
- Is the date correct
- Is there support that explains who, what, and why
For example, a new laptop can be recorded as equipment instead of office supplies. That choice changes your profit and your tax. Your CPA uses common standards such as those explained by the Federal Accounting Standards Advisory Board to keep choices steady across months and years.
The CPA also assigns clear descriptions. Vague notes like “misc” or “general” hide the story. Strong descriptions help you remember what happened when you look back three years from now. They also help staff who join later understand past choices.
Finally, the CPA organizes support documents. They link receipts, contracts, and emails to the entries. This record trail protects you during audits, grant reviews, and board meetings.
Step 4: Prepare, test, and explain the financial statements
After the books are fixed and supported, your CPA prepares the three core reports. You do not need to love numbers to understand them.
- Balance sheet. What you own and what you owe at a point in time
- Income statement. What you earned and what you spent over a period
- Cash flow statement. How cash came in and went out
Your CPA then tests the reports. They look for sudden jumps from last month or last year. They run simple ratios that reveal strain or strength. They ask if the story fits what you know from daily work. If something feels off, they go back and check the entries again.
Finally, the CPA explains the reports in plain language. You should walk away with three things. You know where cash is tight. You know which costs are high. You know if you can afford planned changes.
Sample comparison of weak and strong processes
|
Process step |
Weak approach |
Strong CPA approach |
|---|---|---|
|
Record gathering |
Only some months collected. Cash receipts lost |
All months collected. Every receipt is stored and labeled |
|
Reconciliation |
Done once a year before taxes |
Done every month with clear notes on fixes |
|
Transaction review |
Many “misc” accounts. Little support |
Consistent accounts. Each entry is backed by documents |
|
Statements |
Reports printed with no explanation |
How you can support accurate financial statements
You share the duty with your CPA. Three simple habits raise the quality of your reports.
- Send records on time and answer questions quickly
- Use one place to store receipts and contracts
- Ask your CPA to explain anything you do not understand
These habits protect your family, your staff, and your mission. They also give you calm during audits, bank visits, and tax seasons. When you follow these four steps with your CPA, your financial statements stop being a source of fear. They become a clear mirror that shows where you stand and where you can go next.
