Updated: May 20, 2020
Some small-business owners view bookkeeping as a burdensome task that takes them away from running their business. It makes others nervous, and they may second-guess their knowledge and skills in fear of the Internal Revenue Service knocking on their door.
You don’t have to be intimidated or bored by accounting. Successful business owners don’t view bookkeeping negatively. They have adopted a few basic procedures to stay on top of the paperwork. By doing so, they save time, money and a lot of stress.
Follow these basic steps to gain control - and stay in control - of your business’s bookkeeping tasks:
1. Use accounting software such as QuickBooks
Become at least generally familiar with the software: Know how to input checks, reconcile bank accounts, create reports and other data. Then choose one of five ways to maintain it:
A. Do it yourself. Take a class on the software and dedicate time each week to input information and reconcile bank statements. If you fall behind on inputting transactions, it can be difficult to catch up. This is when most people throw bank statements and receipts into a box and procrastinate. If this happens, you’ll usually end up with option E below.
B. Train and hire a family member to maintain the books. From a supervisory role and internal control system standpoint, it’s still critical to have a basic working knowledge of the software and procedures.
C. Hire a local college student majoring in accounting. You will typically find student employees to be very affordable. Just remember not to give the student too much latitude with check signing or control of paying bills. Although the student is running the system, you still need to supervise their work to make sure your books are tight.
D. Hire a local bookkeeper to provide the services you need, and turn the books over to your certified public accountant for planning and tax preparation at the end of the year. A bookkeeper will certainly be more skilled and knowledgeable than you or a family member, but your cost per hour will increase. One smart strategy is to negotiate a fixed monthly fee so you can budget for the service.
E. Engage your CPA to provide all bookkeeping services, including tax preparation. This is what typically happens when your books have devolved into a mess. While this might seem like the most expensive option, your CPA team will probably be the most skilled and be able to complete the work quickly and efficiently. Even though the hourly rates are higher, the fee should be similar to what you would have paid a bookkeeper during the year to do it on a monthly basis. Another benefit of using your CPA exclusively is that you have confidence it was done right.
2. Scan your receipts, business cards and other important paperwork
Some software products, such as NeatReceipts, import directly into QuickBooks. Utilizing this type of tool will help save time and paper, and help audit-proof your record.
3. Separate personal accounts from business accounts
Don’t mix the two. Keeping personal and business bank accounts and credit cards separate will make bookkeeping much easier and help maintain your corporate veil if you have a formal entity.
4. Avoid cash
Instead, use your debit or credit card religiously. When you use cash you lose track of potential write-offs. If you have to pull money out of an ATM, note on the receipt the purpose of the withdrawal.
5. Go paperless
Storing tax documents for at least six years can be a hassle. Another option is to purchase a small fireproof safe to store important personal documents (passport, life insurance, etc.) along with a regular backup of your bookkeeping software and tax returns saved on a flash drive. For extra data protection, consider off-site physical storage or online data storage for these records and scanned files.
6. Auto-track your mileage
Keeping a written record of all your business, charitable and medical auto mileage can be a pain. Look into a satellite-assisted service, phone application, or software program.
7. Meet with your CPA at least twice annually
Review your business plans, financials, tax deposit amounts, payroll procedures and tax strategies. The cost of taxes is too high to leave your plans to chance. Just a few minutes on a regular basis can save thousands of dollars. Also, remember that your CPA should be bringing you strategies and ideas in these meetings. If the meeting consists of you throwing out ideas and your CPA shooting them down, you have the wrong CPA. Find a planner who is reaching out to you with ideas and strategies on a regular basis.
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Call Irvine Bookkeeping today if you have any questions regarding statement of cashflows. You reach us at 949-545-9980 or visit us at www.irvinebookkeeping.com