One afternoon during a busy tax season the receptionist buzzed me and told me my next appointment was here. I walked into the lobby to greet them and had to hold my breath to keep from laughing. You always hear about the shoebox full of receipts someone brings into the accountant to prepare their taxes. On this day it was not a shoebox but an actual wooden dresser drawer full of receipts.
Want to have less stress and a happier life? Good bookkeeping can go a long way toward reducing your anxiety over financial matters. You may not always be pleased with the results, but you will be able to make decisions based on the information, and dresser drawers are difficult to carry in your pocket.
Here are five bookkeeping tips to help you get started.
This is the most important tip in bookkeeping and in life for that matter. If we never start the process we will never realize the benefits. Jennifer Kunst, Ph.D, wrote an interesting article on this subject:
Neville Symington puts forward the idea that a shift from the old routine to a new way of being requires what he calls an act of freedom. This kind of freedom means having a mind of one’s own, acting in faith in oneself and one’s good objects, and taking a chance. We must cut the ties to the old way in order to try something new. Whether we succeed or fail in that one moment, we have succeeded in the big picture because we have invested in real change. (A Headshrinker’s Guide to the Galaxy, 2012)
Being successful is difficult and takes courage to change. Many people desire to be financially free but are unwilling to do the work which is required. You must be consistent in the effort put forward and be aware what needs to be done. Start now, do not procrastinate.
Spend some quality time and and think about your bookkeeping system. What do you need to keep everything assessable? Use an accounting program to track all of your business income and expenses. There are many programs to choose from: QuickBooks, Xero, Wave, Less Accounting and others. Identify a place for all of your documents and be diligent in filing and saving them.
3-Use a budget
Budgets are amazing. If used correctly your budget will help you make money. They will help you evaluate your current spending, help you set goals for your future and help you track where your money will be spent. At the beginning of the year complete a simple budget for each month. Each month compare your actual results with your budget numbers. If problems appear they say, “fix me.” You are able to take action and correct immediately. Each month as you adjust your spending to optimize your results with the budget you will spend less and will increase your bottom line.
4-Know your cash balance
This may seem obvious but do you know what your cash balance is? Check your cash balance everyday and know what transactions have not cleared the bank. Do your bank reconciliation every month. On the first day of a job I was asked to get the bank reconciliations caught up, they had not been done for over a year. I spent weeks working on them and in the end had to make some sizeable “adjustments” in order to balance. This company struggled with cash flow and one of the reasons was they did not know their actual cash balance. You must know your cash position and manage it accordingly.
Guess what? Your spouse does not want to keep the books. I know it is hard to believe. Too many spouses do it and in most cases it does not work. Do not wait until your tax return is due and ask your tax preparer to clean up the mess. Get someone involved on a daily, weekly or at least monthly basis. Ask your tax preparer if they would recommend someone or ask other business owners for suggestions. A qualified bookkeeper will make your life easier which will make everyone happy. Once you have someone helping with the books ask questions and expect answers you understand. It is your responsibility to make sure the bookkeeping is in order. Do not assume. If you do not know, ask.