Do yours own books
YES, YOU CAN!
If you have a set of books, you probably want to know that they are accurate and will give you financial reports you can trust.
Bookkeeping Workflow
Below is a simple monthly workflow to help you manage your own books in six easy steps. This was adapted from Veronica Wasek’s Monthly Bookkeeping System (link to https://5minutebookkeeping.com/my-monthly-bookkeeping-system-in-5-steps/), who is a wonderful resource for learning more about DIY bookkeeping.
Step 1:
Enter your transactions
Please don’t… “Just click the ‘Add’ button”
This is where you manage your monthly financial transactions from the QuickBooks bank feed and add them to your register. Here, you’ll review & categorize expenses, match income & deposits to sales forms, enter checks to match with payments, transfer funds between business accounts, record personal expenses to the balance sheet, enter relevant notes you might need later, attach supporting documentation, and so on.
Recording transactions properly is the foundation to creating accurate financial reports and sound data for tax time.
Step 2: Reconcile your accounts
I know… everyone asks… “Do I have to?”
Yes (sorry), you do. It’s important to reconcile all of your accounts, every month. This includes bank, credit card, Paypal, and any other 3rd party vendors you use for your business. Monthly reconciliation is the only way to identify duplicate & missing transactions that occur when a password is changed, an account is compromised or closed, and each time your bank momentarily disconnects from QBO (which happens often without ever knowing it.) It’s also the only way to ensure that your accounts are in balance.
Step 3: Check your work
Time to review your work… “Wait, what”?
Doing the first two steps without reviewing the bookkeeping file won’t guarantee clean financials at year-end. And in fact, it most likely will guarantee inaccurate reporting with a whole lot of mistakes… (which you probably won’t want to give your accountant or use to make important business decisions.)
If you want to be sure your transactions have been properly accounted for, here are some of the things to check:
- Confirm that there are no old items in the bank feed.
- Confirm that all your accounts are reconciled.
- Confirm that there are no old transactions in the reconciliation window.
- Look for old balances in Undeposited Funds.
- Review your Income Statement (P&L) for unusual or unexpected balances.
- Review your Balance Sheet for unusual or unexpected balances.
Step 4: Make changes as needed
Aren’t you glad you checked? “Well, yeah.”
Once you’ve identified any errors from the steps above (and there’s almost always something to fix) you’ll want to revise the books to correct those errors. Then check your reports one last time to make sure they look right to you
Step 5: Confirm your customer & vendor data
By now you’re asking… “Are we there yet?”
Okay – yes, you can stop here if you like, but a bookkeeper probably wouldn’t. As the business owner, do you really want to?
Including small details today (when they’re fresh in your mind) can be helpful later when questions arise so you won’t need to rely on memory or spend a lot of time researching things like: who did I collect that cash from; write that check to; mistakenly pay from my personal account? Being thorough now can save you time and frustration later… and it really only takes a few minutes.
- Review your P&L Detail report to make sure that every transaction includes a name showing who you paid, and who paid you.
- Upload or save purchase receipts, bills, statements and other supporting documentation when available.
- Collect W-9s early so you aren’t crunched for time in December to meet the IRS deadline.
You might even consider getting a signed W-9 before you issue payment to vendors who reach the IRS threshold during the year.
Step 6: Close the books
At last… Ahhhhhh!
Your final step each month is to close the books. When you do this, QBO will give you a warning message before you can make any future changes to a prior month’s data. Once you’ve taken the time to complete the bookkeeping cycle, you won’t want to accidentally change your data (and the accuracy of your reports) unless you’re sure that’s what you intend to do. Optionally, you can do this step just once at year-end.
Final note
The workflow above is a basic start to managing a simple set of books and doesn’t address all the little “exceptions” that come up in every business. Those would be things like accidentally making personal purchases on the business card (or business purchases on your personal card); receiving travel reimbursements, tips or a cash gift from a client; collecting, recording & paying sales tax; deciding to sell Gift Certificates, and so on.
When I first started out I asked a lot of questions, and the one thing I heard over and over again was this “Bookkeeping is ALL about the exceptions.” I realize today how true that is.
