Bookkeeping tips & tricks for the Small Business.
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    A local accounting firm wanted an advice page to email to their client base, and post on their website. After reading the owner's copious notes o… Read More
    A local accounting firm wanted an advice page to email to their client base, and post on their website. After reading the owner's copious notes on the subject, this is what I produced for them. Read Less
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Tips& tricks of the Professional Bookkeeper, for the Small Business.


KEEP GOOD RECORDS!:
Bookkeeping, like it or not, is the glue that keeps your business together. If your records aren't in good shape, your business could fall apart. A healthy business is monitored through its records on a regular basis, so you can find problems and correct them, before it might become too late. Remember:If you cannot Measure it, you cannot Manage it.


ALWAYS MAINTAIN AN AUDIT TRAIL:
It can be as simple as a record of all your invoices and checks in numeric order. The thing to remember is never skip numbers, and record voids in numeric order along with the other items. Only, remember to denote them as"voided." This assures no gaps in your numerical sequence,and leaves a proper trail for your accountant.


YOU ARE ONLY TAXED ON YOUR PROFITS:
A lot of people seem to think they're taxed on all the money they take out of their business. Not true:Sole proprietors are only taxed on the profits of their business, not on the total revenue. Estimated income tax payments should be based on profits alone.


KEEP TRACK OF BANK STATEMENTS:
Always request a statement with a month-end cut-off date, because this saves time when reconciling records with the bank statement every month. Fewer checks will need to be recorded as outstanding, this way. Also, don't file statements and canceled checks without reviewing them; view statements immediately for unauthorized checks.


KEEP INDIVIDUAL STORAGE BOXES FOR EACH NEW YEAR:
Keep all your records for each year in its own box: Bank statements, checks, financial statements, paid bills and ALL other backup material. Also include a copy of that year's tax return label with the year and contents. Store your boxes somewhere accessible!


BE CONSISTENT:
Consistency is essential to successful business bookkeeping! Head your columns the same way each month throughout the year. That will save you and your accountant precious time and hours of aggravation.


TRY NOT TO OVER CATEGORIZE:
Many of us tend to make things harder than they need to be, in our attempts to “simplify.” For instance, you don't need separate categories for paper, pencils,printer cartridges, etc. All those items can simply be listed under"office supplies."


START AT THE END:
Determine your expense categories by looking at which tax return you will file. If you file a Schedule C,get a copy of a blank Schedule C, then write down all the categories that apply to your business. Then, you simply include those categories when you set up your bookkeeping system.


SHOULD I USE THE “CASH” OR“ACCRUAL” METHOD?:
The cash accounting system is much simpler for a smaller business. The IRS only allows you to use the  accrual method if you have $5 million or more in yearly sales, or if you carry a large inventory.


ALWAYS DEPOSIT CASH RIGHT AWAY:
Always deposit all cash immediately(same day) at the bank or your credit union, once it is received.This ensures that all income will be properly recorded for your own safety, and an audit trail.


DEPOSIT TICKET BOOKS:
Your daily deposit should be recorded in a deposit ticket book. They come with a white (original) copy and yellow (duplicate) copy. Give the white copy to your bank and leave the duplicate in the book.


USE DUE-DATE REMINDERS:
It's a good idea to use a payroll tax due date reminder, whether you employ a payroll service or you're preparing your returns, yourself. Follow a check-off list of all the required payroll tax reports, and include due dates, type of tax,report number, government agency and period covered. Also indicate if you need to submit money, a report, or both.


FILING PAID INVOICES:
Start new file folders each year for paid invoices and paid bills. You don't need a folder for each customer, unless they produce a large volume of business. It's easiest to get by with a folder for all customers, labeled A - C, D -F, and so on.


MAINTAIN DAILY RECORDS:
If you don't have time for daily bookkeeping, when will you have time to process a whole month's worth of records? Different people use different record-keeping systems,but what matters most is that you have a system, and use it daily.


PRINTED INVOICES:
If you use a lot of invoices throughout the month, you may want to have custom invoices pre-printed. They will look more professional, and you will probably get paid quicker.(Which is always a plus!) Use printed invoices with perforations, so you can tear them off to be returned with payments. Also, print your name and "remit to" address on both sides of the perforation.


PETTY CASH BOX:
Get a metal cash box to hold your currency and coins. Any cash you spend from it should always be replaced by the receipt for that purchase. The cash, plus receipts,should remain at a constant dollar amount. Continue using the petty cash box until you run out of cash, then replenish the box by writing a check out for "cash," expensing all the receipts. Cash the check at your financial institution, put the money into the box and then start back with the same amount.


FROM PAPER TO COMPUTER:
If you're trying to ween your business off of paper bookkeeping methods, you'll want to maintain both systems for a few months, until you're completely comfortable with the new system. Be sure both systems have same totals before dropping the paper!