New clients are usually bitter sweet for us. New clients are always great because it means more income for our business. However, new bookkeeping clients typically also come with a significant amount of bookkeeping clean up and detective work. It's no fault of theirs; they just don't handle everything cleanly and properly. Here are 5 major bookkeeping blunders that we often see and how to avoid them.
Not reconciling all of your accounts
This is the # 1 issue with every business from a bookkeeping standpoint. Listen up; Reconcile ALL of your accounts and You will be doing yourself a huge favor. Many clients just don't go through the final step of reconciling every account. This includes bank accounts, credit cards and loans. Reconciling all of your accounts is the only way to ensure you have accounted for all of your activity. Typically the hang up is that people just aren't sure how to properly code every transaction.
Solution: Don't get stuck on transactions you aren't sure how to code. Code all questionable transactions to 'Ask My Accountant'. Not only will you be able to reconcile but all of your questions will be organized in one spot making it easy on your accountant.
Not Having a CPA and a Bookkeeper
Do you need both a CPA and a bookkeeper? Not necessarily but you need someone (maybe even yourself) to handle both. Your CPA should be used for big picture stuff like taxes and business planning. Your bookkeeper should be used for day to day bookkeeping and financial reporting and analysis.
Solution: Tap your network to see who your business colleagues use. Having a great CPA and bookkeeper on your side is well worth the money.
Neglecting AR and AP
The longer you let outstanding accounts receivable and payable issues go the more difficult it is to figure out what is valid down the road. Also, if you aren't sure if your AR and AP are accurate you could be misreporting your income and expenses.
Solution: Establish AR and AP procedures from the beginning. Analyze your outstanding AR and AP at least once a week to ensure accuracy and follow up with customers and vendors. A clean AP will keep your vendors happy and an up to date AR will keep cash coming in the door.
Not using your bookkeeping software appropriately
So many people learn the basics of their bookkeeping software but don't fully understand it. Bookkeeping in general and bookkeeping software can be very intimidating. Your bookkeeping system should be a tool that you can use to aid you in making important business decisions.
Solution: Take a training class or hire someone to help train you in your specific bookkeeping software. Also, consider using an outsourced bookkeeping firm to help you with your monthly bookkeeping procedures. They are professionals and know the software inside and out.
Putting your bookkeeping on the back burner
Bookkeeping seems to be #1 on the procrastination list. It is very easy to put off. With so many other tasks to handle as a small business owner I can certainly see why it is hard to make time for your bookkeeping.
Solution: Block 1-2 hours a week out of your schedule to attend to your bookkeeping tasks. That is all it should take in the beginning. Also, consider hiring a small business bookkeeper to help you with what you can't get done.
What bookkeeping tasks are you finding difficult to get done?
