Clean and simple bookkeeping—that’s every small business owner’s goal, isn’t?
But unfortunately, it’s just not that easy. You have a business to run. Employees to manage and pay. Products to sell and restock. Networking relationships to maintain.
It’s a lot for one person!
In the midst of all that, how do you manage to keep up with your bookkeeping?
The truth is that it is possible, no matter how busy you feel. The key to clean and simple bookkeeping is following several tried-and-true methods.
Eager to know what they are? Here are our 5 tips for clean and simple bookkeeping in 2021!
1. Hire a bookkeeper with experience.
No, not your teenage niece who’s willing to work for $10 per hour. We mean a knowledgeable bookkeeper who has experience handling other business’s finances.
The only thing worse than trying to do all your bookkeeping yourself is hiring someone who doesn’t know what they’re doing.
So do yourself a favor and hire a bookkeeper who will actually make your life easier. A trained and experienced bookkeeper knows what questions to ask you, how to operate your accounting software, how to properly categorize your transactions and reconcile your accounts, and how to walk you through your monthly statements so that you know exactly where your business is financially.
That’s the benefit of a good bookkeeper. And the time and money they can save you makes the investment worth it.
2. Open a separate business bank account.
The quickest way to mess up your bookkeeping is by mixing your business and personal finances. If you missed our blog on that topic, read it here to learn why that’s such a dangerous mistake!
You’ll save yourself (or your bookkeeper) a lot of time by keeping your business and personal finances separate. And yes, that means having entirely separate bank accounts and credit cards!
3. Use an online accounting tool.
This is another tip that will save you hours on bookkeeping each month.
There are some fantastic accounting tools out there. And because they’re online, you can access them anywhere—and you can easily add your bookkeeper to the account as well. (No more emailing each other statements and Excel spreadsheets!)
If you’re not sure where to find a good accounting software, we highly recommend using QuickBooks Online. That’s the tool most of our clients use, and we find it makes their accounting much easier.
But if for some reason you’re not a fan of QuickBooks, there are alternatives. FreshBooks and Xero are solid options. And if you’re looking for a free option, Wave is great for very small business and solopreneurs on a tight budget.
4. Reconcile your accounts each month.
I know one small business owner who only does her bookkeeping once a year—and it’s to prepare for tax season. She dreads that moment all year round because she knows it will be a headache to sort through a year’s worth of expenses, invoices, and receipts.
You don’t have to wait until the end of the year to do your bookkeeping. In fact, your bookkeeping will be a lot easier if you keep up with it monthly.
And if you really don’t have time to reconcile your books each month, then hire a bookkeeper to do it for you.
5. Categorize your transactions regularly.
Several things happen when you categorize a transaction. First of all, your accounting software assigns it to a particular category, which informs your Profit and Loss report and your Cash Flow report.
It also allows the software to recognize duplicate transactions. Let’s say you pay for a monthly subscription to an email marketing platform. Each month, you get a receipt from the email platform, which you promptly upload to your accounting software. A few days later, the same purchase shows up on your credit card, triggering another entry in your accounting software.
At this point, your accounting software is showing two transactions for the same purchase. When you regularly categorize your transactions, it allows you and your accounting software to recognize duplicates.
So what do you do? You simply merge/match those two transactions or delete one of them, and presto! No more duplicates.
Clean and Simple Bookkeeping: Your Reality for 2021
Are you ready to take the next step toward streamlining your bookkeeping this year?
What small step will you take to reach that goal? Tell us in the comments below!