Even if you’ve been avoiding it for too long.
Bookkeeping is one of those tasks in your business that, while absolutely necessary, isn’t always the biggest priority for many business owners. When there are so many things that need your attention, it’s easy to let bookkeeping fall to the bottom of your to-do list.
But as your business grows, bookkeeping just gets more important. If you’ve been putting off your bookkeeping for a while, you may feel so far behind that you don’t know where to start.
First off, let me tell you that doing your bookkeeping doesn’t have to be scary or overwhelming. I promise that once you start, you’ll feel so much better. I’m sure you’ve heard that bookkeeping is important for tax purposes and in case you ever get audited, but there are so many more benefits to bookkeeping. It helps to understand your numbers so that you know if you’re making a profit, and where you stand financially. It also helps you make financial projections and create a budget for your business.
The first step is to get started, and it’s not as complicated as you might think. While you could use a bookkeeping software like QuickBooks Online, you can easily DIY your books with a simple spreadsheet. Read on to get my step-by-step plan for getting back on track with your bookkeeping.
Start with this quarter
If it’s been months, or even years, since you kept good bookkeeping records, the idea of going back and catching up on your bookkeeping backlog is overwhelming. Instead, start with this quarter, and commit to staying on top of your books from now on. You have to start somewhere, and looking at only 3 months worth of books makes it much more manageable.
From there, you can always work backwards, one quarter at a time, to update your books from previous quarters until you’re caught up.The important thing is to set a starting point, and commit to doing your bookkeeping every month from now on. Click To Tweet
Separate business and personal finances
If your business and personal finances are already separate, great! You’re ahead of the game. If not, it’s time to open a separate bank account and use it exclusively for your business. This is so important for knowing where you stand, and how much money is coming in and out of your business. It also helps to protect you financially if you’re ever audited, or have legal issues in your business.
If you’re not ready to open a business checking account, you can open a second personal account that you only use for your business. The account type doesn’t matter. The KEY is to separate your business and personal finances so that you can clearly see what money is coming in and going out of your business.
Record business income and expenses
Now let’s look at your income and expenses. Start with the first month of this quarter, and download your bank transactions for that month. If you use Quickbooks or another bookkeeping software, you can link your bank feed to download your transactions automatically. If you’re DIY-ing your books, you can login to your online banking and download .csv files for your transactions and copy them into a spreadsheet.
Once you have your business transactions for the month in one place, review each and every transaction. If you’ve been using one bank account for both business and personal use, you’ll first need to categorize each expense as either Business or Personal. Then you can filter out personal expenses, so you’re only looking at your business.
Separate income and expenses into two separate tabs on your spreadsheet, so that you can easily see how much money you spent and how much money you made.
Create Bookkeeping Categories
The next step is categorizing your transactions. You can use whatever categories you want, as long as they make sense to you and you use them consistently. Your expense categories could be things like: Software, Office Supplies, Advertising, etc. These categories will help you see where you may be spending too much money in your business.
If you have multiple revenue streams, you’ll want to categorize your income too. Create a category for each of your different revenue streams so that you can evaluate which revenue streams performed best. As you go through and categorize your transactions, you can also add more specific notes in a separate column that will help you remember what that expense was.
Upload Invoices and Receipts
You’re almost done! The last step is to keep a record of your transactions with invoices and receipts. If you’re using QuickBooks Online, you can attach the invoice or receipt to your transactions, so it’s all in one place. If not, you’ll need to save your sent invoices (income) and receipts (expenses) in two separate folders for each month.
These records help prove your income and expenses if you are ever audited. It only takes a few minutes, and it could save you so much hassle in the future.
You have the steps to get your bookkeeping back on track, now it’s time to commit to it. The best way to ensure you follow through on doing your bookkeeping every month, is accountability. Tell someone about your commitment, and celebrate when you follow through! Acknowledge yourself for doing the work and committing to getting your bookkeeping on track.
How will you commit to completing your bookkeeping for this quarter?
If you need more support to get back on track with your bookkeeping, I would love to help you! Schedule a discovery call to learn more about how we can work together through my DIY bookkeeping program.