Keeping the Books Clean – 10 Bookkeeping Tips for Small Business Owners
Whether you are starting a new company, or trying to get messy bookkeeping under control, it should be a priority for every small business to have clean, organized books, and a plan to keep them that way.
After all, if you don’t know where you stand with finances, projections, shortfalls, and other elements of the financial health of your business, you won’t know if you are winning or losing.
Here are 10 tips to help you with your organization and planning:
- Have a bookkeeper create a chart of accounts for your company’s specific needs. Keep it concise, but thorough. I have found that for most small businesses, it is easier to work without a numbered chart of accounts. You can turn this option on or off in QuickBooks in the preference section. Instead, use a chart of accounts designated alphabetically.
- Take time daily or weekly to add your receipts into accounting software. Once I have entered the receipts, I mark the receipt with a red pen to let me know that it is entered. I keep the receipts in a file to await the statement. The file can be a physical file, or if you prefer, you can scan the receipts and keep the in a file on your computer or cloud. When your statement comes in, it is very easy to match the receipts to the statement and reconcile the statement to the accounting software.
- Keep your vendor list clean and use NOF (not on file) vendors for transactions that you will not be using again so your vendor list doesn’t get outrageously long and complicated.
- If you have recurring transactions each month, “memorize” the transactions in your accounting software, so you don’t have to re-enter them each month. This saves a lot of time and insures that you are entering the transaction the same way each time.
- Leave notes for yourself in customer accounts, vendor accounts, checks, bills, journal entries. Make notes that will mean something to you when you look back on the transaction later.
- Don’t try to do your own payroll. Payroll companies are not expensive and are well worth it.
- Make sure to name your checking, savings, loans, line of credit accounts clearly in your chart of accounts so that you don’t ever get confused what account is which when you are reconciling. I like to label the accounts in this format: “ Banner Checking xx1234”. This is much clearer than “Checking Account”. What if you change banks, or have more than one account?
- DO NOT mix personal and business expenses. Get a separate account and credit card. Keep them separate! If there is the only point that you take away from this article, this is the most important.
- If you have contractors or professional companies working with you that are not Incorporated, you will want to make sure that you give them a W-9 so that at the end of the year, you will know who needs a 1099 issued. It is better to give someone a W-9 that doesn’t need it, than not give one and it is needed. It is also easier to get a W-9 from people before they are paid. They will want to get it back to you quickly to expedite their payment.
- Finally, have a professional bookkeeper or accountant review your books monthly or quarterly depending the volume of transactions and your bookkeeping skill. Do the things that you feel comfortable doing and get on a schedule for a professional to keep everything else on track. This approach will make your year-end process and CPA cost much more manageable.
Kristina’s Abacus can help set up these bookkeeping systems to get you on the path to success. For a free consultation, contact us today!