Ways to Take the Pain out of Your Bookkeeping
Understand the purpose.
One thing that has helped a lot of our clients is understanding why they’re doing their books in the first place. To be able to file their taxes? To provide records to a bank for a loan? To give something to their annoying CPA to get them off their backs?
Sure, all of those things are real reasons. But they are far from the primary purpose that bookkeeping serves.
Review the reports.
This dovetails with the previous point, but at our firm, we are often amazed at how often a client tells us their books are completed, only for it to be clear they have not once looked at the reports. And we’re not talking about minor errors, but rather major items, such as “uncategorized expenses” of $200,000 on the profit and loss or a bank account that is supposedly $50,000 in the negative on the balance sheet. The client hates bookkeeping, so they did all of the data entry (as they felt required to do) but then were done with it.
Take small bites.
Admittedly, even with all of my encouragement, people are only going to “enjoy” their bookkeeping just so much. The tendency will still be to put it off for as long as possible. But beyond losing the valuable information from their reports during that period, that sort of procrastination will also drastically decrease the likelihood of the task ever getting done at all.
Utilize software.
Accounting software has come a long way in the past decade. Many services tie directly into bank and credit card accounts – downloading all of the transactions into the accounting program. Not only that, but they learn over time to which expense category each vendor is tied, which further automates the majority of the process.
Hire someone else.
If nothing else works, just hire someone to do it. We often tell our clients, “We don’t care who does it. You can do it, we can do it for you, or you can hire someone else to handle it. If doing it ourselves is simply not working, we may need to delegate the work to someone else. What matters is that it gets done.”
Ways to Make Bookkeeping Easier
Keep Business and Personal Separate
Maintaining your businesses bookkeeping will be challenging enough without mingling your personal income and expenses. You need to keep your business receipts and invoices for five years, and sorting through a big pile trying to remember if that expense four months ago was personal or business is a waste of your valuable time. Establishing separate files, budgeting systems and bank accounts for your business expenses and income makes tracking and reporting much easier.
Choose the Right Bookkeeping Method for You
If your business is small enough, an Excel spreadsheet might meet your accounting needs for a while. But when your business begins to grow, you’ll need a more powerful solution. Accounting software can be a huge help by organizing your invoices, cataloguing receipts and generating the reports you need to make solid financial decisions with the click of a mouse.
And Keep up With It!
Bookkeeping is like any chore: the longer you procrastinate, the longer it takes to catch up. Unfortunately, ignoring that pile of statements and invoices won’t make them go away! Eventually, you’ll be forced to waste a day that you could be spending with friends or family entering numbers and sending late invoice reminders. Bookkeeping doesn’t have to be a daily chore, but don’t wait until the end of each quarter to pull all that data together.
Pick the Right Time
If you’re most productive and creative first thing in the morning, don’t use that time on your bookkeeping tasks. Determine a time of day or week when you can focus, but don’t need optimal brain function to work. That’s when you should catch up on your bookkeeping. Set this as an appointment in your schedule, and keep to it! If you’re finding this difficult, and that you are behind no matter what, it may be time to add a professional bookkeeper to your support team!
Make Sure You Know the Law
For someone starting out in business, the legal aspects of finances can be the most nerve-wracking. The ATO provides tons of resources, but sorting through the guides can be time-consuming and mind-numbing! A few basic rules you must follow are registering for an ABN, registering for GST if your turnover is more than $75,000, and lodging your BAS on time!
Bookkeeping 101: A Beginning Tutorial
Accountant vs. Controller
Where the bookkeeper records and classifies the financial transactions of the company, the accountant takes the next steps and analyzes, reviews, reports, and interprets financial information for the company.
The controller is actually a company’s chief accounting officer. He/she is responsible for setting up and maintaining the company’s accounting system. The controller is responsible for financial and managerial accounting; in other words, responding to the firm’s accounting data in an appropriate and responsible manner. A controller is usually hired as a business gets larger.
Bookkeeping With and Without a Computer Program
This tutorial on bookkeeping teaches you basic bookkeeping without using a computer program. Why do you need to know that since there are so many computer programs out there you can use? Have you ever heard the saying, “Garbage in, garbage out?” You have to understand the basic bookkeeping behind what you enter into the computer program in order to enter in the correct information. A later tutorial will deal with using a computer program to handle bookkeeping for your business organization.
How to Bookkeep
Decide what type of system to use. The most important part of bookkeeping is being consistent. You don’t want to lose receipts, forget to record transactions, or record the same transaction twice, as this could cause a misrepresentation of your business’s financial health. The simplest way to avoid these errors in by establishing a consistent system for both recording transactions in journals and entering them into the ledger.
Use accounting software. The simplest way to ensure that your transactions are recorded reliably is to invest in an accounting program like QuickBooks, FreshBooks, or Expensify. These will take a lot of the guesswork out of recording different types of transactions and present your information clearly. Many of these programs are available for free or on as a free trial for a limited time.
Use a spreadsheet. For a more manual system, try setting up a spreadsheet to record transactions. This can be done either manually, with physical transaction journals, or on the computer with a spreadsheet program. The formatting of these journals is up to you, but it should include the following, at minimum.
Be consistent. For any system you use, be sure to enter your transaction data on a regular basis and in the same way each time. This is to be sure that transactions are not overlooked and that you have the most up to date picture of your business’s financial health. In addition, it is a good idea to establish a regular schedule for transferring information from the journals to the ledger, perhaps on a weekly or monthly basis.
Small Business Bookkeeping Tips
Keep Business And Personal Banking Separate
All new business owners must make it a priority to open a new bank account for their business, preferably an account with online access, to keep business funds separate from personal funds.
Processing transactions for your personal expenses within the bookkeeping of your business is a waste of precious time.
It’s even worse if you are outsourcing and paying a bookkeeper to process your accounts with these personal expenses mixed in…
Recognize Business Vs Personal Expenses
Drawings (Personal Expenses)
A sole trader or proprietor will most likely withdraw funds from the business account for personal use (drawings). This can be done in place of paying themselves a salary (but check with your Accountant first).
A good practice is to transfer one amount on a regular basis, such as once a week, from the business account into the personal account. The personal account is then used to buy the groceries, books, toys etc.
Choose The Right Bookkeeping Software
The type of bookkeeping software you get will depend on what you need out of it.
Many software providers offer different levels, here are some examples:-
Cashbook
Ledger and Cashbook
Ledger, Cashbook and Inventory
Ledger, Cashbook, Inventory and Foreign Currency Transactions
Ledger, Cashbook, Inventory, Foreign Currency Transactions and Point of Sale
Organize Your Business Documentation
Keeping the documentation for all business transactions is a high priority. They are called accounting source documents. Keeping them enables:-
Easy tracking for any future queries that might pop up, and
Proof (to an auditor or tax man) of what occurred.
Keep Track Of Cash Payments
Any cash received should be paid into the business bank account or petty cash before spending it.
It can be tempting to take the cash right away to purchase supplies but this might cause a mess in the bookkeeping system.
For example, the bookkeeper/owner might.