Congratulations on starting your new business venture! It is challenging and rewarding and no day is the same. The key to making it all work is to automate and delegate when and where you can. One of the best things to both automate AND delegate is your bookkeeping. Starting your business with good bookkeeping practices early, will take a large load off your plate down the road. It is easier to catch mistakes in the beginning than it is to catch them in the end. These mistakes can be extremely costly and come with other consequences such as jail time or seized property if not caught and corrected in time. Do not be worried about having the money to pay for a professional regularly. My recommendation is to find a professional that understands your industry first. Be intentional. The goal is to find YOUR bookkeeper/accountant. Explain to them what you are looking for and what you need starting out and sign on to work with them. For example: You are starting an Etsy store and you have some inventory just recently purchased for the products you make. What you need: A bookkeeper/accountant who understands e-commerce, particularly the Etsy space and
Profit. This is the buzzword that drives businesses today. How PROFITable were we? Yes, but what was the PROFIT margin? Of course profit is important. If a business is not profitable, it will not survive. One way that most companies find out their profitability is with a Profit and Loss Statement or an Income Statement. This document totals all income streams a business has and subtracts out all of its expenses to get was is called a Net Income if the income is more than the expenses or a Net Loss if the reverse is true. It does not take into account any outstanding liabilities the company has and this is one of the reasons why it should not be the primary focus when it comes to your financial statements. To better gauge the financial fitness of your business there are some other financial reports you should add to your monthly statement review. Balance Sheet – The reason it is imperative to review this document is because this is where you will find accumulated depreciation and liability errors. Statement of Cashflows – This shows you how your money moves. Reviewing this document frequently will help your company prepare for the
I am sure this is common place but believe it or not there are still landlords operating without a lease agreement. What is a lease agreement? A lease agreement is a document that outlines who is living in the rental unit, how much the rent is, when it is due, and the rules regarding the use of the unit. In addition, the lease agreement details what the deposit is, what utilities will be paid by the owner and the renter, how to send maintenance requests, and how to give notice when moving before the lease is up. This document is important because it lets the tenant know what to expect, how they are to maintain the property, and what happens if the rent is late. It serves as a layer of protection for both the tenant and the owner. Aside from telling the tenant how he or she must behave while occupying the unit, it details how the landlord is to behave while the tenant is in occupancy. The landlord is to provide the tenant with notice 24 hours prior to entering the unit for non-emergencies, how to handle the security deposit after the lease has ended or tenant has
As a bookkeeper, one common issue that I see with small business owners is the commingling of personal and business funds. It usually begins as a small purchase being made for the business accidentally with personal funds or vice versa. This is not a big deal if it is a one-time thing. When it becomes common place, larger issues can arise and the following questions need to be answered: For those personal purchases made using the business funds, are they being paid back to the business? Is the business paying the owner back for expenses made using personal funds? Are those business expenses that were made via personal funds being treated as an equity investment instead? Are the personal expenses paid for by business funds being treated as an owner draw? How will they affect the business and personal tax deductions? Aside from answering the above questions, deciphering what was a personal expense and what was a business expense so that your business receives optimal tax deductions and credits is CRITICAL. The time it takes your CPA or EA to do this can cost you thousands. In situations like these, having a bookkeeper handle your day to day financial data
Receipts!!! Those pesky receipts!!! They are everywhere and then when you need one, you can’t find the little bugger. You do your best to keep them in a shoe box or manila folder but they do escape lol. You ask yourself “Why do I have to keep these? We never get audited.” I can tell you why. When you make a purchase, whether it is with cash, a check, a debit or credit card, you are given a receipt. This is an ITEMIZED listing of the good and services you purchased. This listing WILL NOT show up on your bank statement and therefore, that little piece of paper has just become an important financial document for your business. To illustrate why it is so important, imagine the following scenario: You are in an office supply store. There you purchase the following: 2 – 10 pack reams of paper 3 – CMYB Toners for your Printer 10 – 12 Tul Pens A car phone charger Earbuds 2 – 20 oz Mountain Dews All totaling $345 (estimating for the scenario). This includes Sales Tax. Imagine you have just now tossed this receipt. It is not month end and you are downloading your
One of the most recurring themes I have noticed as a bookkeeper is most business owners have not reconciled their bank or credit card accounts. I think this is due to the fact that some of them may not understand how powerful a simple task like this is AND how much information it can tell them about their businesses. Here are 7 reasons why this task is so crucial to the overall financial health of your business. Errors – Performing a reconciliation of your bank accounts every month can help locate errors made by you or the bank. Not to mention can catch illicit transfers performed within your accounts. This is especially essential if you have set up bank feeds in your accounting software. Prevention – Unauthorized charges by the bank, check fraud, and other serious issues can be identified AND corrected. Miscellaneous charges and large, out of the ordinary purchases are some prime examples. Powerful Decision Making – When you know where your money is coming from and where it is going, when you know all transactions are accurate and that balances are correct, you as the owner can make some very powerful decisions in regards to your company.
Setting up bank feeds within your accounting software is a huge time saver if you are making hundreds of transactions per month. Particularly if the rules to code them are accurate and all data comes across as it should. Right? For the purpose of this post I will refer to the accounting program I use, QuickBooks Desktop Accountant and how bank feeds work within the program. Bank feeds for those doing LESS than 100 transactions per month is more time consuming than to simply enter the transactions by hand and I will give you my whys. More often than not, the transactions that are downloaded are not properly coded to the income or expense accounts. Which brings me to my next point. The rules needed to ensure proper coding are, more often than not, created incorrectly. They create numerous entries into the “Other Names” list in QuickBooks for example; creating another task of cleaning up this list. In QuickBooks desktop they are imported and treated as if they are already reconciled. WHAT? Now they have to be cleared and properly reconciled depending on the frequency of reconciliations. It may take a long while before and error is caught and the