Small business bookkeeping tends to get pushed to the back burner a lot. If you are a small business owner handling the bookkeeping yourself, it is easy to put off your bookkeeping because there are so many other things to do. Bookkeeping doesn't seem like it directly makes you money, so it's easy to put off until a later time. However, I have noticed that owners don't seem to have a problem sending invoices out, probably because that brings money in. Your bookkeeping should be a tool that you use to aid you in making business decisions and running your business. Here is a short list to close out your monthly bookkeeping for your small business.
Make Time For Bookkeeping
The only way to keep up with your bookkeeping is to schedule a time on your calendar and actually stick to it. Schedule it at a time that works for you but that won't interfere with your day-to-day operations. Maybe it is first thing in the morning, later in the evening, or even before or after normal business hours. The important thing is that you put bookkeeping on your calendar and actually get it done. For a small business, this really shouldn't take much more than an hour or two per week. Updating your bookkeeping on a regular basis will make the process much less intimidating than if you try and attend to it only once a month or, even worse, once a quarter.
I have stressed over and over that reconciling your accounts is the most important task of the entire bookkeeping process. Learning how to reconcile QuickBooks accurately is crucial to your bookkeeping process. You can't move on to any of the other steps of the bookkeeping process until you have reconciled your accounts. The other major mistake I see is not reconciling all of the accounts that can be reconciled. Any account that has a beginning and ending balance can be reconciled. If you get a statement for an account, it can be reconciled. You can reconcile bank accounts, credit cards, loans, and lines of credit.
As a small business, you should also consider doing daily reconciliations. If your online banking system offers daily ending balances, then you can manually reconcile to each day's ending balance. You could reconcile just once per week, but you would have to go day-by-day, reconciling to the ending balance of each day. I personally use this method for our books and some of our clients. If you have a lower volume of transactions, this becomes more feasible. I think it gives you a sense of security, staying on your books, and it also gives you a better handle on cash flow.
Review Bookkeeping Questions
After you have reconciled all of your accounts, you next want to review your bookkeeping for accuracy. One thing you should get in the habit of doing is using the QuickBooks "ask my accountant" feature. The QuickBooks account called "ask my accountant" should be used for questionable transactions. I use it for transactions that I am unsure of and that I want to ask for more information about from the client.
I also use it for transactions that I want to question our client's CPA on. If it is a large transaction, I might leave it in "ask my accountant" to review with the CPA so that it can be properly accounted for in an asset account. The bottom line is that you shouldn't let any questionable transactions stop you from reconciling. Any questionable transactions should be put into "ask my accountant." Then, in your review process, you can go through things listed in "ask my accountant" and do more research.
You may also want to run some report comparisons to look for major fluctuations. Running a Profit & Loss for the current month compared to the previous month can be useful. If you see any major changes, then you want to research them to make sure that everything is accurate.
Analyze Financial Reports
Once you have reconciled your accounts and reviewed your activity for accuracy, it is time to review your financial reporting. By looking at a series of reports on a regular basis, you will keep your business on the path to success. Determine which reports are important to you and analyze them on a regular basis.
Once you customize a QuickBooks report into a meaningful format, you should then use the QuickBooks function to "memorize" the report. Having a set of memorized reports at your fingertips will help you analyze important financial information on a regular basis. Your financial reporting will help you identify both problems and opportunities so that you can continue to run your business optimally.
You should develop a set of monthly bookkeeping procedures for your small business. It is important to set aside some time for bookkeeping on a regular basis. As long as you reconcile, review, and report, you should have a great foundation for your small business bookkeeping.
What is your biggest obstacle to closing out your books on a regular basis?