Let’s talk about something that is integral to a strong and healthy business. Something that can make or break a business. Something that, if used properly, can make our business stand out as a shining beacon of organization and business acumen! Let’s see a show of hands for those who are excited and passionate about…. BOOKKEEPING! Sooooo….Just me then?
Well…. Ummmm…. I guess bookkeeping isn’t everyone’s cup of tea. So how about we just keep it simple and ask ourselves “Why does a business need to do bookkeeping?” The short answer is “We have to”. But we shouldn’t stop there. The short answer doesn’t really answer the question. A business needs to do bookkeeping because bookkeeping allows us to budget accurately. It makes tax time a calm and organized event rather than a frenzied hunt for receipts, invoices, bills and bank statements. A side benefit is a tax preparer that is more than happy to prepare our taxes because our financial information is clear and legible and organized. Bookkeeping puts a wealth of information about the health and progression (or regression) of our business right in front of our noses. Good bookkeeping and simple math show us exactly where we stand in relation to our competitors and provides instant metrics to business valuation representatives and financial institutions. So, while we do “have to”, there are a lot of good reasons why we would also WANT to.
Bookkeeping doesn’t have to be complicated, time-consuming and onerous. Here’s how easy it can be.
Step one: We start with a business account or accounts and always keep business finances separate from personal finances. NEVER shall they mix. Or else our bookkeeping will become infinitely more complicated. Yep… infinitely.
Step two: How do we want to record our transactions? A pen and paper are perfectly fine if the operation is very small. Perhaps an Excel spreadsheet is preferable if someone’s handwriting (not mine of course) looks like a chicken was turned loose with paint on its toes. Larger operations are more suited to bookkeeping software. So what if we get to learn a new skill when we learn the software? We’ll just add a point to the Awesome Business Owner column and pat ourselves on the back.
Step three: We record those transactions every day. Because if we don’t, then the day after tomorrow we won’t remember what we sold or did and how much we earned on what we sold or did. The honest truth is… we won’t remember. So record it TODAY.
Step four: Every month we reconcile our bank accounts and prepare financial statements so we can excitedly compare them against last month’s financial statements! No? I’m the only one who can’t wait to do that? Sigh… I am so alone.
Step five: If we have questions, bookkeepers have answers. The Digital Bookkeeper Association is a great place to find good bookkeepers (https://dba.org/directory/). The Quickbooks ProAdvisor directory is another place to find good bookkeepers (https://quickbooks.intuit.com/find-an-accountant/).
Bonus step: Let’s take our clients to lunch! Business meals are 100% deductible for the years 2021 and 2022. We’ll check with our tax preparers and make sure to follow all the rules and requirements we need to in order to claim the deductions. And this is why our tax preparers love us!