I’ll be honest with you on this one – even I’ve forgotten that I had accounted some expenses first off into prepayments. What I mean by this is that I had thought I’d spread those expenses over the period of time I’m using the service and with doing the initial entry I forgot to make those entries every month as I just forgot I had thought about distributing those expenses at all. I thought I had just expensed them once and for all at the time I made the payment to the supplier. 

So what you’re asking? Well, imagine my disappointment when after the year-end I’m closing my accounts and seeing that I’ve got a huge balance of prepayments standing there. I realized immediately what had happened and what this also meant. This meant that I had loads of expenses still to be taken away from my what I thought was a nice profit.

How can you make sure this doesn’t happen with you? First off think through which expenses you really wish to spread over the period and which you don’t. When you’ve decided on that, make a note of it into your internal accounting rules. Now, as you’ve made it clear and in case you’re getting those expenses you’ve decided to distribute over the period, make sure you keep a list of those you’ve accounted for, their monthly charge and for how long you’ve got to expense them. Make this list and keep it updated. For an example I make a monthly note after I’ve made my entry now. I just note down “OK” under each monthly charge I’ve separately calculated for each balance. It’s up to you and whatever works for you is the best for as long as you just ensure you’ve got those balances being expensed regularly.