Four Reasons to Hire a Bookkeeper:
- You are an expert in your field, not in accounting.
Which is exactly how it should be, and why you should spend more time doing what YOU do best and outsourcing the rest.
- You spend too much time trying to reconcile your accounts.
The time and money a bookkeeper can save you is crucial. If you don’t know how to properly allocate a customer advance in liabilities, why a credit card is not an expense in your Chart of Accounts or the difference between Cash and Accrual reporting, you need a professional bookkeeper.
- You need to send your customers monthly invoices or statements, but you don’t know how.
This is essential to your communications with your customers and your cash flow.
- You have seemingly simple to use QuickBooks software, but you have no idea how it works.
As a QuickBooks Pro Advisor with 38 years of accounting experience, I know how to use accounting software. I can enter your data so it makes sense – and so will your financial reports.
Here are ten bookkeeping tips to help avoid problems if you are doing all or part of your own:
- Don’t procrastinate.
There’s always going to be something that’s more fun to do than your bookkeeping. But if you don’t keep your books up to date, you’ll miss important details such as who hasn’t paid you and when your taxes are due.
It’s a good idea to schedule a regular amount of time to your bookkeeping. Use the time to send invoices, track costs and monitor your cash. This will save time and headaches later.
- Separate business and personal entities and records.
Keep personal and business finances separate to make sure you pay the right amount of tax on what your business earns, as well as offering legal protections in the event your business suffers losses or is sued. Form a separate entity for your business and keep separate bank accounts and accounting records.
- Track everything you pay for personally.
Even with a separate bank account for your business, there will still be times when you pay for a business cost personally. For example, if you travel to visit a client and purchase airfare using your personal credit card, this still counts as a business cost even though the business didn’t pay for it initially. Use an expense report with attached receipts for reimbursement and accounting.
- Keep your paperwork organized.
You may need to quickly find a particular document in your records, such as a receipt or bank statement. Whether you’re keeping your business records electronically or keeping physical pieces of paper, make sure you organize, sort and file documents so they are easy to find.
Keep a small notebook in the car or use a mileage tracking application on your smartphone to track auto expenses. Keep another notebook or application for tracking petty cash withdrawals.
- Avoid using cash for business expenses.
If cash is used, it is hard to keep track of spending. By using a debit or credit card you can keep track of amount spent, where it was spent and when it was spent. This makes tracking your expenses much, much easier.
- If you’re not sure, ask for help promptly.
When keeping your books, it’s a good idea to stay organized and assign different business costs to different categories. However, you may find you don’t know which category a cost belongs in. For example, should a meal in the next town while visiting a client be classified under travel or meals & entertainment? The difference could determine whether it’s a 50% business deduction or 100% deduction at tax time.
Similarly, you may find you don’t know whether a particular cost counts as a business cost or not, or how to treat something for sales tax.
If you aren’t sure, seek professional help. The issue will not resolve itself and the longer you leave it, the more likely it will be lost, forgotten, or penalized later.
Keeping accurate financial records that you update regularly is a vital part of running a small business. Make sure you don’t put yourself at a disadvantage by neglecting those books.
- Review Financials Monthly
At the end of each month, print reports to get an overview of month. You should have a detailed Profit & Loss statement and a Balance Sheet that makes sense and all bank, credit card and loan accounts reconciled. If you have receivables and payables, reports should be run and reviewed.
- Update W-9s on file with independent contractor agreements.
Have signed W-9 documents on file for each independent contractor before you pay them, along with a signed independent contractor agreement. You are required to report all non-incorporated companies and individuals who receive more than $600 in a calendar year on a 1099 form filed with the IRS by Feb 28th. Contractor copies should be sent out by Jan. 31st for the previous year.
- Keep updated W-4s on file
If you have employees, you must have signed and dated W-4s on file with current information for your W-2 reporting. The same deadlines apply for employee filings as for 1099s.
- Have appropriate onsite and offsite data backups
If your computer crashed NOW, how much data would you lose? If this idea makes you break out into a cold sweat, you don’t have a good system in place.