***Full Disclosure: Visit our "Disclosure Policy and Cookies" for details. Affiliate links appear on this page from Google Adsense, Amazon, Impact affiliate members, and Shareasale affiliate members.****
I work with plenty of small business owners that feel bookkeeping frustrates them. They don’t want to do it. They don’t even understand the importance of it. I’m here to tell you that it is important and it must be done properly to be effective. It is important to make bookkeeping a priority for any business, especially if you are a small business owner or entrepreneur.
First, you will need to understand the benefits of having an efficient bookkeeping system:
Benefits of having an effective bookkeeping system
While there are many benefits, below are just some of them.
- Making sure your cash flow has a system. Using a budget and tracking specific transactions over time will help you see areas that need more attention. This will also help you create a process to help retrieve information when and if needed.
- It helps you make smart business decisions. Say, for example, you need to buy a computer; where is the money going to come from? By seeing how much profit you have in your business, you can see how much you can put aside or how much you can use for the computer. I had a client that didn’t care about numbers. I told them repeatedly that they are ultimately responsible for managing their business and must look at the totals. They did and, as a result, made nothing this year.
- It helps you stay clear of any tax violations. There are several areas you need to be compliant like paying income taxes, payroll taxes, corporate taxes, worker’s comp, and sales tax. If your business is working properly and complying with all these different tax agencies, you are less anxious about an audit. You are more likely to keep canceled checks, receipts, tax returns, and other papers related to the review.
- If you are tracking your bookkeeping correctly, you will most likely be able to prevent fraud and embezzlement because you have a check and balance process in place. Bookkeepers can help notice unusual transactions and be able to tell you of them as soon as possible to help you take action.
Accounting Process Tips
Now that you see the benefits of having an efficient bookkeeping system, it’s time to start your accounting process with these easy steps:
- Make an account list or find a list for your industry of the post everyday items to track. Click here to see a list of a common list of accounts to track.
- Start by creating a file in QuickBooks or Quicken that follows your business bank accounts. You can also use Freshbooks (affiliate).
- Download transactions from your bank for the current year. If you are starting in January, you can start fresh. Banks make it easy to download, so why not use the feature?
- After you go through and download all the transactions and add them to the proper account, make sure you reconcile each account by pulling the PDF of the statement.
- Then, keep it going, reconciling your checking, savings, and credit card accounts consistently EVERY MONTH. Not every other month or every six months. There are more likely errors that will occur if you do it infrequently. And, if there are fraudulent transactions, you won’t see them quickly.
- Every 3-4 months, review your Year-to-Date totals. How are you doing? Are you making money? Where is your money going?
I hope this helps you see the reasons why you need to make bookkeeping a priority. If you still feel that you can’t handle doing this process yourself, contact a trustworthy bookkeeper, like me, to help implement and maintenance your books.
If you are looking for help getting your bookkeeping organized, I can help. Visit our: Bookkeeping Services page for details and to send me a message.
Now it is your turn! What frustrates you about bookkeeping? Please leave a comment below.
Feel free to check out this post by Inc. magazine called: 5 Reasons Why Bookkeeping Should Be a Priority
Please note these are affiliate links through Amazon, and at no additional cost to you, I will earn affiliate fees if you decide to make a purchase.
Related Topics:
Thank you for explaining how important it is to have an effective bookkeeping system. My sister has been wondering what steps she should take to run her business better. I’ll have to share this with her so she can see about implementing something like this or hiring a bookkeeper.
I made bookkeeping a priority — and outsourced it. The very best business decision I’ve made in several years. I couldn’t be happier.
Good for you. That’s great! It’s so important.
Sabrina -Okay, confession time. Every April, my blood pressure rises. I am a model of how not to manage business records. I think it would be different if I were ever audited, but to date I’ve not changed my ways. With me, sadly, its somewhat similar to waiting till the night before the test to study. I do file taxes every year, but I don’t always pay every quarter as I should… and I’m a good, (usually) responsible person. I floss, eat my broccoli, all of that, I just hate taking the time for record keeping. WHY DO I DO THIS TO MYSELF?! The worst part of it all? My son is a tax attorney! I KNOW those IRS folks have no sense of humor. In my defense, I’m not handling huge sums of money, so it’s not like our government is without great resources because of my negligence. Watch for me next April 15th on the post office steps singing “We Shall Overcome.”
Thanks for your confession. You are not alone. I tell clients, it doesn’t matter what you did in the past, let’s change it now so from this point forward you will be set. They appreciate that I don’t judge them. Thanks for commenting.
Not that we can get around it.. but I will say, staying on top of it on a regular basis makes it so much easier to manage, than doing it at the end of the year… or outsource.. that would be better
I agree, Kristen. Thanks for commenting.
As high vibrational, successful, leaders, business women who are here to make a difference…we need to be supported and ALLOW ourselves to be supported. Great article. Thank you.
Well said, Teresa. Thanks for stopping by and commenting.
This was my number 1 priority when I worked full time! But it took me about 5 years to do that. At the beginning of each year I turned over everything to my accounting firm and they in turn, had a staff bookkeeper take care of it. Biggest benefit to me: no more missed tax due dates! Money in the bank.
Good for you, Patricia. It helps so much when we have support. Thanks for stopping buy and commenting.
Like any part of running a business Sabrina, outsourcing bookkeeping (when that is NOT our business, of course) IS an excellent means of making MORE money in the long run. Outsourcing skills we don’t specialize in not only frees up time to do what we do best … but … a professional bookkeeper may find hidden costs we never even thought to include, in turn making us MORE money!
Great point, Trish! Thanks for stopping by and commenting.
Funny timing because I decided today it was time to outsource my bookkeeping.
Good for you, Kris! Be sure to get referrals (and follow-up with them) when finding a bookkeeper. Good luck.
Although I have a background in accounting and finance, I must admit my “doing it by hand” system is pretty antiquated. Yet, it works for me. 🙂 Although of course, I am only doing the prep and have an accountant who does both my personal and corporate taxes. I am very focused on managing money in my life and have a strong sense of budgeting. It seems to be something I inherently have within, Sabrina. Have a very prosperous 2016 and your clients are very fortunate to have someone like you helping them keep their money and businesses in order!
Thank you for your kind words, Beverley. It’s great that you know what you want and don’t want to take on, it is so important for business owners to clearly know what their tasks are. Hope you have a prosperous year also.
Okay, this is one of my goals for this year–to clean up my bookkeeping. So this definitely helps! Thank You!
Thanks for stopping by and commenting, Susan Mary. It’s a great time to do it too. =) Good luck.
I’ll be honest, as a business owner I am HORRIBLE at bookkeeping! I don’t make it a priority…so much to do, so little time. You bring up many good topics and helpful tips in your article. Doing a 90 day review is a terrific way to assess, analyze, and modify as needed. However, in the end, I need to get much more organized in this area and do a better job.
Thanks for stopping by and commenting, Meghan. Rest assure, you are not the only one. When you start out, daily or weekly tracking works best. Then, when you see your spending patterns, it will be easier to manage. Good luck.
The first person I hired when I started my flight school, my first business, was to consult with and hire a bookkeeper. I’m not interested in that work and so I need someone to keep me on track and I recommend it to anyone else who shares my view. It’s so important.
You are a smart lady, Beth. Many clients come to me after years of incorrectly or not at all doing their bookkeeping and not filing their taxes. Then, they have have spend money on me to go back and clean up and pay the tax agencies on their behalf. The best way is to do what you did. Set it up properly first and then modify as need be. Thanks for stopping by and commenting.
The 1 thing I outsourced was my bookkeeping & tax prep. I love that I did this as it has freed me up from a dreaded task.
Your a smart lady, Roslyn. Not many people think of it as a priority. It’s so sad what people put themselves through when they don’t want to deal with tasks. Thanks for stopping by and commenting.