Do you cringe when you think about bookkeeping for your business? You have receipts in the car, crumbled receipts in your purse or briefcase, and vendor invoices buried in the papers on your desk or email inbox. Here are ten easy steps you can put in place today to better organize your bookkeeping records so the next time you think about your bookkeeping, everything is nicely organized for you.
1. When vendor invoices are received, enter into you accounting software as soon as you can. Try to set up time on your calendar once a week to handle this task. By handling this task frequently, you will pay less late fees and perhaps take advantage of those vendors who offer discount pricing if paid within ten days.
2. A simple way to manage those vendor invoices, purchase an accordion file A-Z and use this to file your vendor invoices. No need to set up individual file folders that take up valuable file space. As soon as the invoice has been paid, just file the invoice in the appropriate letter slot. If you need to locate a past invoice, all you need to do is go to that letter. If you are converting to a paperless office, set up a file folder on your computer for Vendor Invoices and store the paid invoice in this file. At the end of the year, copy these files onto a thumb drive and store with your business tax files.
3. Bookkeeping rule #1: do not co-mingle personal and business expenses. Sign up for a credit card exclusively for business and one for personal expenses and get in the habit of using the correct cards. This will certainly save you a lot of headaches if you are ever audited by the IRS. It will also make it easier when the credit card statements are received and you are only looking at business expenses and not both personal and business and spending more time sifting through the charges.
4. Use online banking for bill paying. With most major banks this is a free service and the beauty of online banking, you just enter the amount of the invoice and schedule the invoice for payment before the due date. Just don’t forget to enter the transaction into your accounting software. The benefits of online bill pay – saves you postage costs and also by scheduling before due dates, saves on those late fees.
5. Reconcile your bank statements monthly. Try setting up time on your calendar the week the statement is received. If you have been disciplined to enter your transactions each week, this should not be a time-consuming process.
6. Credit card purchases need to be entered into your accounting software on either a daily or weekly basis. When your credit card statement is received, you reconcile the statement similar to how you reconcile your bank statement.
7. Keep your chart of accounts simple. If you have multiple income streams you may want to set up income accounts for each product or service. This will allow you to monitor sales each month when you review your Profit & Loss report. For your expense accounts, keep it simple. Remember the more accounts you have, the more time you will spend in deciding which account to use.
8. When hiring new employees or contracting with new subcontractors, make sure they submit a W4 or W9 form. Establish a procedure to receive the forms before their first payment is made. Remember to enter their tax information into you accounting & payroll software when the form is received. This will make preparing W2s and 1099s a less stressful task in January.
9. If you have a PayPal account, you need to create a bank account for PayPal similar to how your checking account is set up. This account will need to be reconciled each month as well. PayPal allows you to download monthly financial reports for reconciling the account.
10. If you find you just do not have the time and you are still stressed with your bookkeeping, contract with a virtual bookkeeper. This will allow you time to do the things you excel at and pass the task on to some who enjoys bookkeeping.