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Fractional Accounting for Small Businesses and Startups

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Is your accounting hiding a costly mistake? Undeposited Funds – the financial graveyard – where bookkeeping mistakes are buried

Undeposited funds can silently disrupt your finances. Watch out for these common issues:

  • Duplicate entries inflating your income. Is your bookkeeper forcing the bank reconciliation by adding credit card payments received from customers from the bank feed and recording the amount to cash and sales? For accrual basis Companies it is important to coordinate with the accounts receivable person and obtain the merchant statement to ensure the amounts are applied to the customers invoice and then properly recording the batch deposit into the cash account so QBO will reclass the batch credit card deposit out of undeposited funds into the cash account enabling QBO to properly match the transactions during the bank reconciliation process.
  • Delayed bank deposits messing with your cash flow. Still getting customer checks? After you receive the customers checks, do you apply the customer payment to the invoice timely yet there is a significant delay in depositing them into the bank?
  • Incomplete records leading to inaccurate month end financial reports.
  • Ballooning Undeposited Funds Balance: Over time, failure to correctly clear out undeposited funds can lead to a large, inaccurate balance that does not reflect true money in process or cash on hand. This can indicate underlying system problems or bookkeeping errors.
  • Tax and Reporting Issues: An overstated undeposited funds balance can result in overreported profit, leading to potential overpayment of taxes and an inaccurate balance sheet.

Best Practices to Avoid Undeposited Funds Problems:

  • Regularly review and reconcile the undeposited funds account—ideally on a weekly basis to ensure the account is zeroing out or if there is a balance due to timing differences that you know what they are from and that they clear out within a reasonable period thereafter (approximately 1-3 days).
  • Use systematic workflows for receiving payments and grouping deposits.
  • Double-check that payments are matched to bank deposits properly, especially when multiple payments are bundled together, and that the person preparing the bank reconciliation isn’t forcing the bank and books to match by simply adding the bank feeds to the books without investigating why there is no match when the books are on the accrual basis.

Links to QBO videos regarding the undeposited funds:

What’s the Undeposited Funds Account

How to record a bank deposit

Let Tekio Advisors LLC handle your accounting and bookkeeping services in New York! Get Started today with our small business bookkeeping and Tell Us About You!

We primarily focus on small business bookkeeping growing E-Commerce Companies (Consumer Product Goods industry), SAAS startups, HVAC Companies, and Professional Services – accounting and bookkeeping services for Interior Designers, Architecture Firms, and Occupational & Physical Therapy Companies.

Building the Foundation for Reliable Financial Reporting

The Critical Role of Monthly Bank Reconciliations:

Keeping accurate books isn’t just a best practice—it’s a necessity for every successful business. At the heart of reliable accounting and trustworthy financial reports lies one simple but often overlooked process: monthly bank reconciliations. Here’s why making this a non-negotiable habit will set your business on the path to financial clarity and compliance.

What Is a Bank Reconciliation?

A bank reconciliation compares your business’s internal financial records (your books) to the bank statement for the same period. The goal: to ensure all recorded cash transactions actually made it to (or from) your bank account, and that there are no unexplained discrepancies.

Why Monthly Bank Reconciliations Matter

  • Ensures Accuracy: Catching errors—like missing deposits, double payments, or unauthorized transactions—early prevents small mistakes from snowballing over time. Reconciling monthly means you spot problems when they occur, not months or years later.
  • Guards Against Fraud: Regular reviews and reconciliations serve as a deterrent to fraudulent activity. You’re more likely to spot unauthorized withdrawals or unusual transfers quickly and take action.
  • Supports Clean Financials: Most end-of-year accounting headaches can be traced to sloppy monthly reconciliation. Accurate reconciliations feed directly into your financial statements, providing a true and fair view of your company’s performance and cash position.
  • Simplifies Audits and Tax Preparation: When your books match your bank’s records each month, auditors and tax preparers can work efficiently. This reduces the risk of costly penalties, delays, or unnecessary IRS attention.
  • Enhances Decision-Making: Up-to-date and accurate information allows owners and managers to make smarter, more timely business decisions—such as managing cash flow, budgeting, or seeking financing.

What Can Go Wrong Without Regular Reconciliations?

  • Cascading Errors: If a mistake in January isn’t caught until December, every subsequent report—and decision based on that report—may be compromised.
  • Inaccurate Financial Statements: Profit and loss reports, balance sheets, and cash flow statements lose credibility, making it hard to attract investors, renew loans, or sell your business.
  • Hidden Bank Fees or Errors: Without reconciliation, recurring fees or accidental charges from the bank may go unnoticed, quietly eroding your bottom line.
  • Potential Compliance Issues: For companies with investors or lenders, improper reconciliations can lead to compliance problems and internal control issues when undergoing a financial statement audit or review by your CPA firm.

Create a Reconciliation Habit Into Your Monthly Routine

  1. Set a recurring date each month—ideally soon after your bank statement is available.
  2. Use accounting software with bank feeds or reconciliation modules to automate parts of the process.
  3. Audit any discrepancies immediately. Investigate the cause and document your findings.
  4. Keep supporting documentation organized and attached to each transaction.
  5. Have an independent review—if possible, assign someone other than the preparer to review the completed reconciliation.

Accurate, timely bank reconciliations are more than a bookkeeping chore—they’re the bedrock of sound financial management. Make them a priority, and your business will be equipped with better data, fewer headaches, and more trust in every number you report. For QBO users see bank reconciliation guide from intuit: https://quickbooks.intuit.com/r/accounting/bank-reconciliation/

Refreshing Cash Flow Tips for NYC Interior Designers

Cash Flow Management Tips for our Creative Interior Designer Clients

Interior design is a profession that seamlessly blends creativity and practicality. While an eye for design, and an understanding of spatial aesthetics are essential to your business, successful interior designers also require robust business and financial skills to maintain a thriving business with positive Cash flow to meet your business and personal financial goals.

Interior designers face unique challenges in cash flow management due to the nature of their projects. These challenges include:

  • Project-Based Revenue: Payments often depend on project completions, which can lead to progress billing and irregular income streams.
  • High Upfront Costs: Designers often need to purchase materials, furniture, and decor before receiving payment from clients.
  • Client Payment Delays: Late payments from clients can further exacerbate cash flow issues, leaving designers struggling to cover their expenses.
  • Seasonal Demand: The interior design industry often experiences seasonal fluctuations, with more demand during certain times of the year and lulls in others.

Strategies for Effective Cash Flow Management

1. Develop a Detailed Budget

A budget provides a clear overview of your financial situation and helps you make informed decisions on allocating expenses based upon projected revenues. A well-planned budget is the cornerstone of effective cash flow management.

2. Implement a Retainer or Milestone Progress Billings System

One of the best ways to mitigate cash flow issues is to structure your payment terms. Instead of waiting for full payment at the end of a project, break it into milestones:

  • Initial Deposit: Secure a percentage upfront before starting the project to cover preliminary expenses.
  • Progress Payments: Request payments at key stages of the project, such as after the design concept is approved or once construction begins.
  • Final Payment: Collect the remaining balance upon project completion.

This approach ensures a steady stream of income and reduces the financial burden on your business.

3. Set Aside an Emergency Fund

Set aside a portion of your earnings into an emergency fund to build a reserve that can sustain your business for at least three to six months. Having a financial cushion ensures that you can weather unexpected expenses or periods of sluggish revenue without jeopardizing your operations.

4. Negotiate Payment Terms with Clients and Vendors

Don’t hesitate to negotiate payment terms that work in your favor. For clients, establish clear payment expectations in your contracts and consider upfront deposits, early-payment discounts, or late-payment penalties. For vendors, explore options like extended payment terms or bulk discounts when purchasing frequently used materials.

5. Monitor and Reduce Overheads

Regularly review your overhead costs to identify areas where you can decrease costs and alleviate cash flow pressures.

6. Implement an Effective Accounting Solution

Modern accounting software, such as QuickBooks Online, can be a game-changer by helping you track income and expenses, monitor Accounts Receivable, monitor outstanding payments, and track your cash balance. However, outsourced accounting and bookkeeping for interior designers can provide insights into the overall financial health of your business while providing suggestions to reduce costs and insights into your most profitable projects and customers.  Let’s Talk ! Book a Virtual Meeting!

7. Cash Flow Forecast

A cash flow forecast is like a budget in that it estimates incoming cash and outgoing cash based on past performance, factoring in current economic and business conditions. It aims to help your company minimize the impact of a cash shortage by being proactive in mitigating potential issues during an economic period where costs are rising due to increased materials costs from tariffs or slow payments from customers due to rising interest rates. It may be helpful to forecast future cash flows for 3, 6, or 12 months. Contact us for our Controller and CFO services today!

Conclusion:

As an interior designer, your creative vision is your greatest asset! By implementing the strategies outlined in this guide (budgeting, structuring customer payments, and cash flow forecasting) your business can better navigate financial challenges and maintain steady cash flow so you can focus on doing what you love: designing beautiful spaces that inspire and transform living spaces!

Advantages of a 13-week cash flow model for Small Businesses in New York City

A 13-week cash flow forecast is a crucial tool that can help you forecast your cash available to meet operating expenses.

Timing differences from your net income from your profit and loss statement to the cash in your bank include the following:

  • Revenue recognized in Quickbooks vs cash received due to timing of the collection of accounts receivable.
  • Prepaid expenses – upfront cash outlays for insurance, rent, advances to suppliers, etc. while GAAP or accrual basis accounting recognizes the expenses over the respective term or when incurred.
  • Capital expenditures – Upfront cash outlays for equipment while the expense is recognized ratably over the estimated life of the fixed asset.

Advantages of Utilizing the 13-week cash flow model:

  • Flexible and Forward Looking – The 13-week horizon is long enough to provide meaningful forward visibility but short enough to adjust the model as your business adapts to changing circumstances.
  • Spend Management – By assessing your cash inflows and outflows week by week, startups and growing businesses gain a clear, actionable view of their cash position, enabling better operational control and expense / spend management.
  • Proactive liquidity & risk assessment – The model helps identify potential cash shortfalls or liquidity risks well in advance, giving startups time to take corrective action—such as needing to draw down on a line of credit, raise funds from venture capital firms, managing expenses, or assessing receivables and identifying slow paying customers.
  • Transparency with investors and banks – The model serves as a transparent, data-driven tool for communicating financial health, liquidity, and assessing working capital needs which builds trust with your investors and lenders.  Positive cash flow and working capital are important metrics for lenders and investors and as such, preparing for any compliance and reporting requirements with detailed cash flow forecasts and updates on any changes to the model is important will enable positive relationships with your stakeholders.

Accounting Advisory Tip – Diversify Funding – Concentrations in a single funding source increases vulnerability! Establishing multiple financing sources from venture capital, credit lines, and traditional bank loans, startups and small businesses reduce dependency and improve resilience against unforeseen circumstances such as rising interest rates, or tightening of credit standards.  Additionally, monitoring useful KPI’s such as AR turnover, DSO (days sales outstanding), and Inventory Turnover to ensure you are getting the best utilization of assets to generate cash flow.

Conclusion: In summary, a 13-week cash flow model is a valuable tool that helps startups and small businesses in Brooklyn, Queens, Bronx, and NYC manage cash proactively, make informed decisions, and build credibility with key stakeholders.  Let Tekio Advisors LLC focus on your small business accounting services and Cash Flow Forecasting with our Fractional CFO Services  – Whether you prefer to utilize Excel or Forecasting software such as Dryrun or Helm.