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Bookkeeping Tips By Anna Dizon

Top 25 Bookkeeping Tips From The Pros

By Anna Dizon on November 9, 2017 

Running a business, no matter the size, is unimaginable without a solid bookkeeping system because apart from fulfilling tax requirements, it gives you a concrete idea on your company’s financial viability. But what does it take to keep your books accurate and reliable?

Here are the top 25 bookkeeping tips for small businesses from the pros:


1. Keep Your Records Organized

Dave Du Val, Chief Customer Advocacy Officer, TaxAudit

One of the most important bookkeeping tips for small businesses is to stay organized during the entire year so you are not scrambling like a rabbit at a greyhound race track come tax time.

  • Gather up and organize receipts and other required documentation, such as mileage logs.
  • Gather documentation for furniture and equipment purchases.
  • Check all 1099-K forms for accuracy and report them on your tax return. Wait to receive them before you file.
  • Prepare to list all income received, including cash, checks, credit cards, PayPal, and bartering income.

Steve Pritchard - Bookkeeping Tips

2. Keep Your Personal Finances Separate

Steve Pritchard, Founder, Cuuver

You should keep your personal finances completely separate from your business. When you start your own business, you are usually responsible for pretty much everything, which includes bookkeeping. To make life easier for yourself, a fundamental tactic to avoid a lot of confusion in the long run is to set up a separate bank account for your company.

Doing this will save you a great deal of time and energy when sifting through your expenses, because you won’t need to filter out any personal purchases you have made. It’s also a good idea to have a separate bank card for your business, so when you’re going through your invoices and receipts, you will know that all the expenditure has gone on business-related items, helping you to speed up the bookkeeping process.

To learn more, see Fit Small Business’ review of the best business checking accounts.


Lee Reams II - Bookkeeping Tips

3. Use Cloud Accounting Software

Lee Reams II, CEO, ClientWhys

Cloud accounting and bookkeeping applications bring real time reporting to small business owners. This automates much of the tedious bookkeeping functions, but does not replace the need for expert accounting guidance. The saying “garbage in” equals “garbage out” rings true for bookkeeping.

See Fit Small Business’ recommendation of the best accounting software.


Crystalynn Shelton - Bookkeeping Tips

4. Create a Simple But Functional Chart of Accounts

Crystalynn Shelton, Accounting Specialist, Fit Small Business

The chart of accounts is a list of accounts that is used to categorize every financial transaction that your business generates. Your chart of accounts will reflect your entire operation which is why it is considered the backbone of your bookkeeping system.

Accounting software usually comes with a preset of list of accounts that will start you on your way, but as your businesses grows, you need to know how to modify your list. Some of the main things to remember when creating your chart of accounts are as follows:

  • Set up accounts that you need and nothing more. Don’t over categorize.
  • Keep them generic. Instead of creating accounts with customer or vendor names, it is more functional to list an account per type of transaction instead.
  • Make sure to select the correct account type for each account, or there will be errors in your financial statements.

Sarah Webb - Bookkeeping Tips

5. Save Money on the Smaller Stuff

Sarah Webb, President & COO, Plaid for Women, Inc.

Before investing in expensive payroll software for just a few employees, spend time learning how to calculate it yourself and set up an excel schedule. Then go and put a reminder on your calendar for all the due dates: payroll dates, federal filing dates, and state filing dates. This will save you tons of time and more importantly, money, by doing it yourself. Still let the pros calculate your annual returns, but save money on the smaller stuff.


6. Go Digital with Your Payroll

John Waldmann, Co-Founder & CEO, Homebase

The best bookkeeping tip I can give to a local business is to ditch the paperwork and go digital. Too many local businesses are still using paper to manage their hourly employees. By using a software solution like Homebase’s free time sheets, local business managers and owners can eliminate paperwork, store their employee records in the cloud, and import hours directly into payroll and accounting software.This makes running payroll a breeze, simplifies bookkeeping, and saves hours each week for busy owners and managers.


7. Segregate Duties for Each Part of the Cash Conversion Cycle

Ryan Hintenach, CPA, CFE, MBA, Manager, Concannon, Miller & Co.

Companies should segregate duties, especially for a company’s cash-conversion cycle, including paying vendors, approving vendor invoices, and receiving customer payments. These duties include separating the following business processes: custody of assets, record keeping, authorization, and reconciliation. Segregating duties helps avoid fraud. For example, you don’t want the same individual responsible for setting up new vendors and approving vendor bills to also cut checks.


8. Regularly Reconcile Your Bank Statements

Paula Welsh, CEO & Founder, 7 Charming Sisters

Way back when starting my first business, I was using QuickBooks and religiously recorded every expense. However, I was busy and kept putting it off until 6 months went by. Finally, I had 6 months of bank statements and bookkeeping to reconcile. Of course, as the best lessons are the ones you learn the hard way, I had a ton of mistakes: entering $1000 instead of $100, transposing numbers, a few forgotten items. And of course, this all affected my bottom line. Moral of the story: whether you are using a bookkeeping software or doing it by hand, consistently reconcile your bank statements. Don’t learn the hard way.


Deborah Sweeney - Bookkeeping Tips

9. Keep Track of Your Financial Data on a Monthly Basis

Deborah Sweeney, CEO, MyCorporation.com

It’s important to keep track year over year and based on month so you can evaluate seasonality, anticipated trajectory, and growth. If you track monthly based on category of income, it can help you see what areas of your business are increasing, which are decreasing, and areas for potential improvement. You may also find areas where you should invest more because your ROI is higher in particular areas. It’s important not to just track annual numbers, but monthly and quarterly to assess shorter term, as well as over time because there may be small fluctuations, but this helps you build trends.


Brian Ashcraft - Bookkeeping Tips

10. Perform a Self-Audit

Brian Ashcraft, Director, Liberty Tax Service

Perform a self-audit to gauge your clerical and financial health. An audit can be as basic as reconciling your books and identifying delinquent accounts to collect on, to more complex based on your company’s size and industry and your current business health. Use the opportunity to really look through your business and ensure checks and balances are in place that you can answer any questions the IRS may have. For a guide to your industry, take a look at the IRS Audit Techniques Guides categorized by industry.


11. Resolve Errors ASAP When Reconciling

Adrienne Zimbro, Owner, InLine Accounting

One of the biggest mistakes I see small businesses committing is not reconciling their accounts each month, or at least each quarter. An even bigger mistake is to leave a discrepancy – there should not be even a $0.01 difference between what is in the bank and what is in the books. If there is, then DO NOT reconcile. It’s best to find the source of the problem ASAP so it can be fixed. Otherwise, the discrepancy will carry over to the following months until it is fixed. If your books don’t line up with what is in your bank accounts, you financial statements will be inaccurate.


12. Document & Deduct Expenses That Are For Personal/Business Use

Joshua Zimmelman, President, Westwood Tax & Consulting LLC

If you use something for both business and personal purposes (such as a cell phone), you can deduct a percentage of the expenses on your tax return based on the percentage of business use, but you’ll need detailed call logs and other documentation to back that up. If you use your car for your business, keep detailed records and include your mileage log in your bookkeeping so you can deduct a percentage of your vehicle expenses on your tax return.


13. Detailed Inventory Records are Important

Lou Casale, Head of Communications, Hiscox USA

Small businesses often times don’t have the benefit of a large staff to take care of tasks like inventory maintenance, which are important but often overlooked. Having a proper inventory management process can help small businesses prevent employee theft or misplacement of merchandise. These records can also help businesses track customer shopping trends and ensure efficient buying in the future.


14. Go with QuickBooks

Brian McIntyre, President, Thames Ventures

Most small business owners don’t understand two-sided accounting. They don’t know that debits have to equal credits and that assets equals liabilities plus equity. Also, the biggest thing they need to realize is that doing your books two minutes every day is a lot easier than doing it for four hours once a month.

For these reasons, I advise my clients to use QuickBooks. It’s relatively inexpensive and once it’s set up correctly, it’s easy to maintain. If you are intimidated, hire a bookkeeper to set it up and then maintain it going forward. But whether you set it up yourself or hire someone, learn your numbers. After your customers, your financial situation is the most important thing to staying in business. A recent study of business failures by U.S. Bank showed that 82 percent of businesses failed because of poor cash-flow management or poor understanding of cash flow.


15. Separate Receivable Payments from Borrowed Loans

One of the most critical errors that can be made in bookkeeping is to confuse money received from clients with borrowed funds. Apart from both being cash that the business can use for operations, they have an entirely different effect on your bottom line. This is why it is a good idea to treat them as different accounts to avoid confusion that has the potential to turn into a financial crisis. Using an accounting software that can separate the two will make keeping track of both transactions easier.


16. Treat Your Checks Like Cash

Checks have the same function as cash but some business owners still make the error of losing track of each check they write. Even your cancelled checks have the potential to create serious errors in your books so it is important to document them well. The easiest way to solve this problem is to have a system in place to process and record your checks. The simple task of documenting and filing will overwhelm you if you wait for checks to pile up. Ensure you record them as you go, and it won’t cause you any problems in the future.


17. Take Control of Your Accounts Receivable

There’s nothing nicer than having a lot of sales come in, even if it’s on credit. However, the real challenge is converting credit into actual funds your business can use for its operation. If you are unable to manage your accounts receivable, then selling on credit will be more of a problem instead of an asset to your company in the form of a serious cash flow problem. Make sure to specify clear payment terms to your customers. Set strict deadlines and consider blacklisting repeat offenders if you think they are taking advantage. Chase every late payment, as each is essentially an interest-free loan.


18. Plan for Major Expenses Including Taxes

Forecasting and creating a budget for your major expenses like inventory, office supplies, and repairs and maintenance can save you a lot of worry. Setting aside a contingency for these will help ensure that your business will continue operating and will not be marred by issues that arise from lack of inventory, supplies, and equipment.

Even tax expenses can be anticipated provided you keep track of your financial records properly. Setting aside a particular amount each month corresponding to your monthly sales will make it easier for you to pay your taxes, because you won’t have to outlay a large amount of funds at the end of the year.


19. Use Online Banking for Your Business

Regardless of the size of your business, it is still advisable to open up a separate business bank account, in particular one that allows for online banking. This method is more effective in monitoring your company’s cash flow, as it allows you to access information and generate reports in real time. It is also makes management of bills and money transfers for expenses (i.e. payroll) easier. In addition, it is now possible to integrate your online banking platform with your accounting software, making it simpler to access a timely and reliable set of financial information.


20. Don’t Wait Until Year End to Talk to Your Accountant

Find a good advisor and make it a point to be in contact with your accountant regularly, not just at the end of the year. Doing so will make sure that any bookkeeping issue will be caught in time and will be easier to work out. Even though accounting software can enable practically anyone to monitor their business financials, having a good accountant as an advisor is valuable as they are able to give you sound opinions beyond setting up an accounting system. Your accountant should be able to help you with setting up your business from the start – creating an effective business structure, obtaining necessary permits and licenses (if required), setting up payroll, and even filing taxes.


21. Take Advantage of Small Business Tax Credits & Deductions

There are a number of small business tax benefits available to you as long as you maintain the proper records. Things like health care tax credits, auto expense deductions, charitable contribution deductions, and even software expense deductions are some of the possible benefits your company can qualify for. This is one reason why proper bookkeeping practices are essential; they will help you get the most out of tax credits and deductions. Be sure to ask a tax professional to advise you on which ones you can file for.


22. Leave an Audit Trail

An audit trail is a system that allows for a quick retracing of transactions in your business. This means that apart from meticulous recording, you will also observe a logical order when handling documents on a day to day basis. If you keep your invoices and checks in numeric order, not skipping checks or invoice numbers, as well as store your financial documents by date, you should be able to easily reconstruct your company’s finances going back one year or more. By leaving an audit trail, you’ll also minimize most of the issues that businesses encounter during audit and tax filing.


23. Petty Cash Receipts are Important

More often than not, petty cash transactions are not monitored because they deal with small, day to day cash transactions. However, they are highly susceptible to the risk of theft. When left unchecked, missing small amounts can turn into a large headache. Therefore, it’s important that these transactions be well recorded and documented each time you dip into petty cash. This is one of the best bookkeeping tips that you can get if you are determined to keep track of the company’s day to day expenses. It is also a good idea to reconcile your petty cash account on a daily basis to quickly spot any inconsistencies and discourage theft.


24. Use the Appropriate Accounting Method

Before you can even start recording the simplest transaction, one of the first decisions you need to make is which accounting method you should be using for your business. Cash basis accounting means you record revenues when cash actually changes hands. It is a simple approach using a single entry system that doesn’t need complex bookkeeping practices, but this is only ideal where transactions are on a strictly cash basis.

Accrual accounting on the other hand records transaction based on when money is supposed to change hands. It’s a more complex method that requires some time to learn but accurately keeps track of all transactions and how it affects your company’s assets, liabilities and income.

Learn more about accrual vs. cash accounting.


Kabbage - Bookkeeping Tips

25. Avoid Paying Business Expenses in Cash

There are a number of drawbacks when you use cash to pay your suppliers and employee salary. Among other things, cash payments are more difficult to trace so it will be hard to keep track of company spending, and you run the risk of overstating your income. Additionally, without any records of purchases, monitoring write offs will also be a challenge. Make it a habit to use a debit or credit card or check payments when settling company expenses. This method makes it easier to keep track of the amount spent, where it was spent, and when it was spent.


Over to You

Bookkeeping can be overwhelming if not handled properly, but if you observe the best bookkeeping practices, you’ll find that this task doesn’t have to be that intimidating at all.

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