Come on: you know it’s true. You’ve screwed your books up. Royally.
Right now, you couldn’t even guess who still owes you money, whom you owe money to, how much money you actually have, or why the bank keeps calling you.
You’ve got a mountain of receipts you haven’t entered into QuickBooks—not including all the ones you’ve lost outright. Oh, and don’t forget all those random auto withdrawals you never get around to recording.
You’re staring down an avalanche of paper and digital notes that don’t mean anything to you. Even just thinking about the effort of sorting it all out makes your head hurt. You’re overworked and overwhelmed as it is!
So now what?
Don’t worry. Help is at hand. Here are 10 tips to help you get out from under that pile of paper and back on the right track.
1. Stop procrastinating and get started right now.
Procrastination is bad for everything, especially your books. Don’t leave cleaning up your accounts for a rainy day—because that rainy day will never come. And the longer you wait, the worse your records are going to get.
As a business owner, you won’t ever have that perfect opportunity to go back and take care of everything. So stop waiting for it.
Get to work as soon as possible. (Preferably right now.
2. Start at square one.
The main reason so many businesses end up with a mess for their bookkeeping is that they started out all wrong. When you’re off from the beginning, things are only going to get worse.
The first step to getting on the right track? Hit pause. Start from scratch.
That might not sound like the easiest fix, sure, but your accounting system must be built on a strong foundation. When things get this bad, it’s best to start with a clean slate.
3. Get the proper tools.
To maintain proper bookkeeping, you need accounting software.
Yes, you do.
It doesn’t matter how old-school you are. In the modern world, software is essential for setting up and documenting all your transactions.
Find an accounting system you’re comfortable with—and one that works well with the practice management system you’re using.
4. Move your accounting to the cloud.
Maybe you don’t think cloud-based accounting would change much for you. Believe me, it will. Once you’ve made the switch, you’ll never dream of going back.
Cloud-based accounting gives you convenient access to whatever you need—whenever you need it. In fact, most cloud software systems have a handy app to give you real-time dashboards even when you don’t have a computer on hand.
And as a bonus, it also keeps you away from those old-school remote desktop connections. You know, the ones you have to host on your server that have a complex and time-wasting login process.
The sooner you can get those out of the way, the better.
5. Find digital tools with seamless integrations.
In the past, accounting and tech didn’t usually mesh well. Fortunately, that’s changing fast in our shiny modern era.
If any particular integration isn’t available, at least make sure you can use an import/export process to keep your systems synced up together. Trust me, you don’t want to have to manually enter reams of data.
Manual data entry sucks. It sucks big time.
If you don’t know how to get your inventory system, payment gateway, or SaaS billing system to speak to your accounting software, find someone who does. Streamlining your financial operations really is essential.
Any time you invest in this now will be more than worth it in the long run.
6. Create a chart of accounts.
When you’re setting up your new system, you’ll need to create a chart of accounts.
What’s a chart of accounts? I’m glad you asked.
A chart of accounts is just the listing of different accounts you select from when coding your transactions. That’s it! It’s simple, but it’s very, very important. Selecting the proper account is essential for accurate bookkeeping.
7. Record all of your transactions properly.
There are two types of accounting methods: cash and accrual.
The cash method records transactions when money actually changes hands. For example, a customer pays you for an item or you pay an expense.
The accrual method, on the other hand, records transactions when the income is earned or the expense is incurred. For example, you receive a bill from a vendor or a customer purchases an item from you on payment terms — before any actual money has been transferred. This method of accounting typically presents a more accurate picture of your company’s performance over a given period, whereas the cash method can skew numbers based on whether you have deferred paying your bills (racking up a large accounts payable balance) or been slow in collecting from your customers (resulting in an increased accounts receivable balance).
The method that’s right for you will depend on your unique business goals and strategies. However, there is one universal piece of advice: whichever method you choose, use it for all your entries. Never try to juggle both techniques at the same time. And definitely talk to your tax advisor about which method might be best; although you may feel that the accrual method better represents your company’s performance, the cash method may result in a substantial tax savings. Luckily, you can use a different accounting method for your internal books versus what you use for external (tax) reporting. Sure, this may complicate things a bit, but that’s what the experts are for.
8. Reconcile your bank statements—frequently and consistently.
Once you’re set up, you should have a good accounting software, integrated bank accounts, and a chart of accounts.
With just those few things in place, you’re already way ahead of the game. Next up: regularly reconcile all of your transactions so that your financials stay up to date.=
What does that mean? It means you have to categorize every transaction by whichever method you choose, cash or accrual.
Whenever you receive a payment, tie it to a revenue account and invoice. Whenever you pay a bill, reconcile it to an expense account and tie it to a receipt.
Note: you should have already set up the expense and revenue accounts in your chart of accounts before this stage.
Here’s the kicker: bank reconciliations are the part of the process where most business owners get lost, mostly because they let things pile up. It really doesn’t have to be too much of a chore, you just have to keep on it. It takes a little old-fashioned discipline.
It’s a lot like doing the dishes. If you do some every day, it’s not that big of a deal. But if you let the dishes pile up in the sink, you’ll have a real mess on your hands before long.
Plus, by reconciling regularly, you’ll have access to real-time information and financial reports—the kind that you need to make informed decisions for your business. It’ll make bookkeeping a whole lot easier.
And tax season will be much smoother, too, when you can provide all the proper reports at the click of a button.
9. Create consistent procedures and abide by them.
Creating standardized procedures for you monthly financial reporting and processing might seem like an obvious strategy, but you’d be surprised how often it falls by the wayside, especially among startups and newer businesses.
With the appropriate procedures in place, you can clean up your books in a more automated way than you might think.
So get some standard procedures going, and feel free to tweak them as you see potential for improvement. It’ll make everything smoother in the long run.
And the short run as well.
10. Bring in a little much-needed help.
You’re a busy person. Sure, you could probably do all this, but is it really the best use of your valuable time?
We didn’t think so. So if all this seems too overwhelming for you, why not let a team of seasoned veterans take that headache away from you?
And even if you are checking all the boxes yourself, chances are you’re putting some stuff in the wrong places, categorizing it incorrectly, or missing opportunities. That’s not because you’re dumb or careless. Accounting is just a very complex, confusing world.
That’s why it’s a good idea to have some specialized experts in your corner.
We’ll use our years of education and professional experience to sort everything out and get you on the right track in no time.
Let us know how we can help you, and we’ll start making your life easier.