7 Effective Bookkeeping Habits You Can Implement Right Now

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7 Effective Bookkeeping Habits You Can Implement Right Now

Good_Bookkeeping_HabitsI was thinking about how dialed in my bookkeeping system is; both for our business and our personal books because I keep both. Bookkeeping comes very easy to me obviously and is also near the top of my priority list. Most people that blog are going to write about their particular service because it's what they know and believe to be most important. Salesmen are going to tell you that sales are the most important thing. Marketing services will tell you it's all about marketing to your prospects. Executive coaches will tell you it's all about planning and execution. So who is right? Well everyone is correct because each facet of business is incredibly important. In order to succeed you need to be good at all of them and you need to find the right balance between them. Here are 7 effective bookkeeping habits that you can implement right now.

Create a Bookkeeping System

Way too many business owners come to us without a bookkeeping system in place. Sometimes they "have something in Excel." Other owners are using QuickBooks but they don't really know what they are doing. I'm not sure why people choose to dabble in a profession as important as accounting if they don't know what they are doing. If I have a leak in my roof I'm definitely calling a professional, not getting up on the roof with the hot mops acting like I know what I'm doing. 

Create a bookkeeping system and use accounting software to do so. There are so many great software options for bookkeeping now. It probably makes sense to advise with a professional to pick software that is suitable for your business and get some basic training. 

Update Books Daily or Weekly

Updating the books often is one of the most crucial items on this list. Every day that I get to the office I start it the same way, a cup of coffee and a quick update to our books. It might take me 10-15 minutes a day. I catch questionable transactions right away and always know where I am from a cash flow perspective. I own our bookkeeping and I use it as a powerful business tool.

Reconcile All Accounts

I would say that reconciling your QuickBooks accounts is probably the most important thing on the list and the most neglected task. Reconciling is the only way that you know you have accounted for everything, whether you put things in the right place is another story, but we will get to that.

Don't stop with reconciling only your bank accounts either. You should reconcile any account that you can tie to an ending balance. This includes bank accounts, credit cards, loan, lines of credit and payroll liabilities. Want to take reconciling to a whole other level? Don't wait until the end of the month statement and try doing daily reconciliations on your bank accounts.  

Creating Meaningful Financial Reports

You should take a bookkeeping system that is updated often and reconciled and create some meaningful reports to help you run your business. Don't think about the normal reports like a P&L and balance sheet, although those can be useful. Identify some key metrics that are really important to you. What information would really help you out? I have a set of about 10 reports that I look at on a regular basis and it makes all the difference in running the business. 

Use Bookkeeping to Grow

At this point your bookkeeping system is firing on all cylinders so you can take it to the next level. Let's take the bookkeeping and turn it into a tool that you can use to grow your business. Take those custom reports that you developed in the last step and analyze them. Draw some conclusions and review the reports and your observations with your team. Hold everyone in the business accountable to hitting your goals.

So many businesses want to know if they are doing well, but they have no way to measure it. Develop a budget for your small business and compare your actual performance to it. There is no way to tell if you are doing well if you don't have goals and you don't measure your performance against those goals. 

Have Books Reviewed by a Professional

You should have your books reviewed by a professional. It could be once a month, quarter, or year but you should have them reviewed. It doesn't have to be an expensive endeavor it could simply be another set of eyes on your work confirming everything is correct. This goes back to a point I made earlier about putting everything in the right place. Just because the books are reconciled does not mean that they are accurate. If you are looking at inaccurate reports you have a misrepresentation of your business performance. Making crucial business decisions on inaccurate reports is a dangerous game. 

Tax Review Before Year-end

Here is one for all of my CPA friends and colleagues; have your books reviewed before year-end. You want to know what your tax liability looks like before the tax year changes. This way you can make any key tax moves before year-end. While there are some things you can do from a tax standpoint after year-end there are not as many options.

Bring your CPA a clean set of books in late November or early December each year. Have them calculate a tax estimate for you so you know where you are at. If you are going to owe a lot in taxes or get a refund it's much better to have that information in advance rather than last minute.

There are my seven bookkeeping habits that you can change right now to get your finances in order. 

Create a bookkeeping system, measure, and use it as a tool to grow.

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