Bookkeeping is tedious and time-consuming. Even if it’s not us, we highly recommend you consider hiring a third-party bookkeeper to not only make things easier on your end, but also to make sure you stay within all regulations and foster your business’s growth. That being said, if you are currently keeping your own books, below are a few useful tips to simplify your life.
Yes, it is crucial to keep all of your business receipts, but you need to do more than just that in order to stay well-organized and not run into issues later on. When you make a note regarding what exactly you spent the money on and what for, it will for one, give you good insight regarding where your funds are being allocated to, and two in the case of an audit you will be much more prepared and have solid proof of your business expenses. Receipts tend to be not very detailed and it can be hard to remember details of the exact purchases down the road, so adding this simple step can be very helpful. There are two ways through which you can do this depending on your preference, either by hand or through bookkeeping software or apps. That being said, if you do decide to go down the manual pathway, it is highly advisable to keep three separate journals for this (an accounts payable, an accounts receivable, and a job costs journal.)
Contrary to what you may initially think, when all of your money is just in one place it can become a mess which is hard to keep track of. One way through which you can organize your finances and make it easier for you to see how your business is doing financially is to have a separate account for paying expenses, a separate account for managing payroll, and a separate account for receiving payments from clients. Of course, you have to manage this with precision and good records, or it will be just as messy. The tendency is to make lots of transfers, forgetting which card goes with which account, and you end up with a perfectly planned system which you failed to maintain. In this case, you also have wasted precious time and money, so it’s great to use different accounts if you aren’t using a bookkeeper, but not so great if you don’t give it the time and discipline it needs.
As you are aware, bookkeeping is a lot of work – a lot of important, unavoidable work. That being said, life is unpredictable, and a natural disaster or even a computer hard drive failure or a virus can wreak havoc. In order to help you be protected against such mishaps, it’s useful to have a backup of your records. Make sure to backup regularly to an external drive or file server, and to keep an eye out to ensure the backups are successful. There is a handy rule known as 3-2-1 which can help you with choosing how to backup your records in a manner that is the safest. The rule is as follows: possess at least three copies of your data, store two copies on different forms of media, and have one copy hosted off-site. This is just a guideline and there is no one size fits all, so remember to be flexible and do what works best for you! Back up all data you can’t retrieve easily, so you don’t need to back up your bank data, amazon charges, etc.
And don’t forget that the biggest tip to simplify your life is to hire a bookkeeper who actually understands accounting and speaks the accounting language of GAAP! Not only will doing so free up a large portion of your time so that you could use it in other aspects of your business, but this will help you get rid of bookkeeping and accounting errors that can be costly. That being said, it’s also important to hire someone that is knowledgeable in this realm and knows your type of business in order to be as efficient as possible. At Soundbookeepers, we have over five decades of experience and work with many independent contractors and solopreneurs. We know our stuff!