As a small business bookkeeper I deal with all sorts of businesses and different types of business owners. That is what makes my job interesting and fun. Typically when a new business owner starts out they either can’t afford a bookkeeper or think they can do the bookkeeping on their own. I DO think that it is a good idea for a business owner to do the bookkeeping in the early stages of the business so that they understand the financial aspect of their business. This will prove invaluable when analyzing your financial reports later on in the life of the business. Usually once a business owner gets overwhelmed by their bookkeeping I get a call; and more often than not the books are a mess. So to help out these owners and hopefully help myself I would like to offer six simple steps to keep your business financials organized.
1. Get some type of accounting software – I will highly recommend QuickBooks. I tell people that QuickBooks is accounting software for those that don’t necessarily understand accounting. Very user friendly and widely used in the business world.
2. Enter everything and reconcile - if you enter each transaction that hits your bank account, credit card accounts etc you can’t go wrong. Use the reconciliation function in you accounting software to balance to your statements every month.
3. W-9’s - technically you should get a W-9 from every vendor you pay money. If you are using independent contractors make sure you get a W-9 and insurance certificates from them. 1099 independent contractors are a hot item right now with the IRS, and are becoming a red flag for an audit. So make sure they meet the requirements of being an independent contractor.
4. Don’t intermingle personal expenses – Don’t intermingle personal expenses! Got it? It’s easy just don’t do it. Get a separate bank account, credit card etc for yourself and your business. If you are in the very beginning stages and you don't have a business bank account set up go ahead and pay for everything with your personal money. Later on when you do get a business account set up you can cut a reimbursement check to yourself to keep things clean. There is no need to ever bring your personal accounts into your business bookkeeping system.
5. Sometimes doing nothing is better than doing anything – the worst thing you can do is do half of the job. Enter some stuff, but not everything. Enter invoices, bills etc even though you don’t know what you are doing. If you are confused or lost, hire a bookkeeper. The bill to clean up the mess you created will be motivation enough to just outsource it from the beginning.
6. Develop a filing system - a good filing system is not a box full of receipts. Use some file folders with the letters of the alphabet on it (I know ingenious huh?). Maybe if you pay a vendor often make a separate folder just for them (see above parentheses).
These simple steps will keep you organized financially. Eventually you will become too busy and notice that you are spending too much time doing your bookkeeping and not enough time doing what you love; running your business.
When that time comes feel free to email me.