Bookkeeping is too important for your business’s growth to be overlooked. With a little organization, guidance and practice, you can structure a good bookkeeping system with these five general principles.
1. It’s organized and it’s a daily priority.
Organizing paperwork and recording financial transactions daily is the first step in creating an accurate and efficient financial system. On a daily basis, you receive customer payments, send customer estimates or invoices, and receive bills from vendors.
Follow best practices by recording all such financial paperwork in your accounting software (e.g. QuickBooks) daily or, at worst, weekly. Your accounting software will remind you when it is time to collect customer payments, pay bills and taxes, reconcile accounts or reorder new inventory. Remember, falling behind means it’s harder to catch up.
2. Devote the same time and day every week to your books.
As human beings, we are creatures of habit. Get into the habit of focusing on your bookkeeping and financial reporting the same time and day every week. If you are in the process of developing or restructuring your bookkeeping system, schedule this time to work with your bookkeeper to learn how bills are paid and ensuring customers pay on time.
3. You know how to “do your books.”
If you’re working with a banker or investor to raise capital, are you able to run financial reports on your own and explain the numbers? If your answer is yes, fantastic! But if you answered no, you’ve got work to do.
If you have a great bookkeeper, work with him/her to understand your bookkeeping process, software and how transactions are recorded. Understanding how the financial system of your business works is one of the most important things you should know as a business owner.
4. Bank and credit card statements are reconciled monthly.
A bank reconciliation is done to compare your records to your bank and credit card statements. The goal is to check for any differences between the records. For example, a vendor might not have deposited your check payment or your bank statement might show a customer deposit you forgot to enter in your books.
Sometimes you or your bookkeeper might enter incorrect transactions or the bank could make an error. The longer you ignore these differences, the harder it will be to manage your books.
5. Connect with your CPA bi-annually or as needed.
As a licensed professional, CPAs are up to date on current tax issues, trends and changes within the accounting world. If you need to make a strategic financial decision, like investing in a piece of equipment or investing in a new product, it’s good to research and review the pros/cons yourself and double-check with your CPA. You should also check in with your CPA proactively to make tax planning decisions.
