Top Tips to Keep Your Bookkeeping in Tip Top Shape—Series #5

No matter the size of your business, it is unimaginable how it would properly function without a solid bookkeeping system in place. It serves a great purpose for tax preparation, succession planning and financial reports for making business growth decisions. Also gives a concrete indication of your company’s success and sustainability. But to maintain your books, keeping them accurate, timely and reliable is one of the biggest challenges. After all, you got into business to sell a product or provide a service, not to do bookkeeping. Let’s get it in shape and keep it that way.

  1. Invest Time to Learn Simple Bookkeeping Processes
    Many clients often make major decision on how to manage their finances, without considering what they really need. Ask others in your industry, or those that have been in business for a few years, or a CPA or Bookkeeper, before investing in expensive software or payroll services. Sometimes, the time spent learning the basics of how a process works, is well worth the time in the long run. Having a better understanding helps when it comes to deciding on software purchases or services, even employees, that are needed to manage the books. Something as simple as adding reminders to your calendar for due dates, etc., can allow you to still manage the task, no additional costs. But be wise. Know your limits. The experts are good at what they do, so don’t get in to deep over your head before you call for help.

  2. Create a Simple but Useful Chart of Accounts
    The chart of accounts is a list of accounts that are used to categorize every financial transaction. Your chart of accounts will reflect your entire operation, which is why it is vital to the bookkeeping process. Accounting software, such as QuickBooks, usually comes with a preset of list of accounts that helps to get started, and as your business grows, you will want to know how to modify your list. Some of the main things to remember when creating your chart of accounts are:

    • Set up accounts that you need and nothing more. Don’t over-categorize.

    • Keep them generic. Instead of creating accounts with customer or vendor names, it is more functional to list an account per type of transaction instead.

    • Make sure to select the correct account type for each account. An incorrect selection will result in inaccurate financials.

  3. Don’t be Afraid to Ask Questions
    Ask questions when you don’t know the answer. Properly categorizing income and expenses is important and can save you and your accountant a lot of time at the end of the year. Don’t forget, you accountant bills you for the time they spend, so take advantage of this by learning what you don’t know. Ask questions. Ask the questions “What do I need to know, that I don’t even know to ask?” This will also help minimize year-end issues, as well as help you manage your bookkeeping efficiently, and knowing what weaknesses you need to focus on. Keeping your bookkeeping current as well as accurate will give you better positioning to successfully growing a business.

This fifth in the blog series, assists in developing procedures that maximize efficiency for you and your customers. Efficient processes are cost effective, making a positive impact on your bottom line. If you follow my series, and implement these changes, you will soon be in tip top shape, ready for changes, growth and more. You will be better prepared for a tax planning session in the 4th quarter, helping you to make the most tax advantageous decisions for your business. See you next month!