Far too many small business owners consider bookkeeping to be a necessary evil to running their companies, and look upon the tracking of their activities with all the enthusiasm of watching Liz & Dick. Bookkeeping doesn’t necessarily have to be equated with the “joys” of experiencing Lindsay overacting through a ludicrous script. Adopt these simple steps and you’ll find that bookkeeping is an essentially simple and simply essential business process.
- Keep separate bank accounts – Intermingling is a good thing at a cocktail party and a really bad thing in bookkeeping. Keep your business accounts away from your personal ones and transfer or draw checks from the business to your personal account for any payments or salary you’re due. If you have employees it’s recommended that you have a separate payroll account as well.
- Set up a system – Every penny in and every penny out has to be accounted for, and it’s much easier to keep up with this requirement if you’re organized. Take the time to create both physical and electronic filing systems for all your records and make sure that each instance is accurate and complete.
- Buy the right software – You don’t need to shell out thousands a month for Enterprise Resource software as your small business is much better served by basic programs as QuickBooks or Sage Peachtree which are simple, straightforward and affordable.
- File your tax reports on time – Even if you don’t have the money right there and then to send a check along to the IRS, file the required report before the deadline to keep those penalties from piling up.
- Keep records an auditor would understand – Sure, it may be clear to you what “J K XYZ din” means when scrawled on the back of a Psaro-Taverna restaurant receipt, but it’s going to be Greek to an auditor… and even you might have some trouble translating the hieroglyphics a couple of years down the line. “Dinner with John Kearny of XYZ Corp.” is considerably preferable.
- Mind the gap – Everything you issue, such as invoices and checks, should be consecutively numbered, and there must be no gaps in the sequence. So if you void a check or mess up an invoice, make a record of what happened to the missing number or you’ll pay for it in spades at audit time.
- Invoice promptly – The faster you issue the invoice the faster you’ll get paid, so as soon as a task is completed or at other intervals for ongoing projects which you’ve determined in conjunction with the client get that billing out!
- Invoice accurately – Nothing will turn a good client into an irate one faster than an incorrect invoice. Even if the error is in their favor, they’ll still look at you like a rank tyro amateur.
- Reconcile your bank account daily – When banks mailed out your statements once a month it was a major hassle to reconcile the account, as you might not even remember the details of what you spent four or five weeks earlier. With internet real time banking you can check the status of your account daily and make the appropriate notes for every entry while it’s still all fresh in your mind.
- There’s nothing petty about petty cash – It’s actually a corruption of “petit” which means small in French. Even in the day of universal debit and credit cards it’s advisable to keep some cash on hand for smaller and casual expenses and account for every in and out.
- K.I.S.S. your categorization – You don’t need to over-categorize and segregate your expenses down to separate “inkjet” and “toner-cartridge” levels when just Office Supplies will do just fine, thank you very much.
- Business is business, personal isn’t – No, you’re not running your business so that your cousin Bubba can get a new General Lee paint job on his rusty Dodge Charger. If your friends or relatives need loans, direct them to their local bank branch.
Bookkeeping is no longer the domain of Bob Cratchits scratching away at stacks of ledgers in cold hovels. It’s an integral part of every business and your company will work more smoothly if your books are well-kept!