Have you ever thought that it would be easier to completely start your small business bookkeeping over? Sometimes, it is much easier to start your QuickBooks bookkeeping over from the beginning and do it the correct way. The bookkeeping for a small business can get out of control quickly for many different reasons
Common reasons I see for poor bookkeeping systems: do it yourself bookkeeping, incompetent bookkeepers, family member bookkeeping, lack of time, and just neglecting to get it done. When your small business books get this messed up, it is often easier to just start your QuickBooks bookkeeping over and do it correctly from the beginning. The question is, how do you start your bookkeeping over?
Identify Mistakes and Desires
The first thing to do if you are starting your bookkeeping over is to identify the mistakes in and shortcomings of the current bookkeeping system. Is your balance sheet off? Is your chart of accounts too complicated? Write down everything that you dislike about your current bookkeeping system.
The second thing to consider is, what do you want from your bookkeeping system? What information do you wish you could extract from your bookkeeping system that you currently cannot? What financial reports would help you run your business better? It is much easier to design a custom bookkeeping system that works when you know what the goals are.
Hire a Professional
I think that hiring a professional from the beginning is probably the most important step in starting your QuickBooks bookkeeping over. I would suggest hiring both a CPA and a bookkeeper. In addition, you should consider hiring a Certified QuickBooks ProAdvisor. I think that a lot of small business owners skip this step and try to do the bookkeeping themselves or get help from a friend because they think it will save them money. Unfortunately, failing to hire a professional in the beginning often costs more money in the long-run. It is easier and cheaper for a professional to set up the correct system than it is to fix the mistakes made by amateurs. You don't necessarily need the professional to keep your books indefinitely, but it might make sense to have them set up your QuickBooks file and offer you ongoing QuickBooks training and support.
Customize Your Chart of Accounts
The chart of accounts is extremely important to set up correctly and you need at least a basic understanding of the QuickBooks chart of accounts to do so. It is really important to understand the different account types and where to classify certain transactions. This is where you need a professional on your side, to help you learn to code transactions appropriately.
Additionally, you should use the QuickBooks ask my accountant account to code any questionable transactions. The biggest mistake I see businesses make on their chart of accounts is making it too complicated and gearing it toward their tax return. The chart of accounts is the core of bookkeeping and your bookkeeping should be geared toward your needs and desires. You should customize your chart of accounts to make your financial reports meaningful to you.
Collect Information
Now that you have identified what you want from your bookkeeping and created a meaningful chart of accounts with the help of a professional, it is time to gather all the pertinent information.
First, you will need to decide on a date to start your books over. For most, the obvious choice would be the first day of the current fiscal year.
Second, you need to dig up the information and data that you need to start your books over. Identifying all of the accounts that you need to enter beginning balances for is a great start. Find the beginning statements for every bank account, credit card, loan, line of credit, equity account, etc. Again, you may need the help of a professional to determine some of the balances for items like loans from partners and equity accounts.
Enter Balance Sheet Items
Now that you have all of your statements and information together, you can enter the beginning balances for your balance sheet items. Continue to build out and customize your chart of accounts with all of the data that you have gathered. The end result should be a very clean-looking chart of accounts and balance sheet. Now that you have a clean set of books, do yourself a favor and keep them that way.
The key to clean books is proper coding and QuickBooks reconciliation. It is important that you code each transaction properly. If you are unsure at all of how to code something, use the "ask my accountant" code until you can check with a professional. This account will keep all of your questions organized in one spot for easy access. Make sure to reconcile all of your accounts on a regular basis. You need to reconcile any account that provides a regular statement like bank accounts, credit cards, loans, lines of credit, and payroll liabilities.
Enter Historical Data
Finally, I recommend that you consider entering some historical data. You have given your bookkeeping a fresh, clean start. However, if you can't easily do financial comparisons to prior years, then it will be difficult to measure how your business is doing. You need to determine how far back you would like to go and then enter the data through journal entries. Maybe you only need to enter the data for the whole year in summary format, but you may find it helpful to enter data month-by-month in order to generate both monthly and year-to-date comparisons.
I have given you a guide on how to start your QuickBooks bookkeeping over the right way. The best piece of advice that I can give you is to hire a professional from the beginning to help you set up the proper bookkeeping system. However, if your books are in the state where you need to start over, then I probably don't need to tell you to get some help and do it right this time.
What mistakes have you made that resulted in a bookkeeping mess?
Photo Credit: Canva
