Secrets to Good Bookkeeping
Whether you do your own bookkeeping or use a professional firm providing bookkeeping, there are best practices you should be sure are being followed to keep your records accurate and complaint with tax laws.
Using Best Bookkeeping Practices can make a significant difference in the success of your business. Here are a few of the most important ones, which form the backbone of our philosophy at BookWerksTM, a Cincinnati-based bookkeeping service that focuses on small businesses and franchises.
Separate business and personal finances
Mixing personal and business finances complicates tax filings and can lead to potential legal issues.
Automate
Invest in accounting software like QuickBooks, Xero or FreshBooks to automate routine tasks. At BookWerksTM, we use cloud-based accounting so each client’s financial information is available to them at all times.
We work remotely with small businesses and franchises all over the country, and keeping financial records in the cloud is both more secure and convenient.
Link your bank accounts and credit cards to your accounting software to automatically import transactions, reducing manual data entry—and the errors that come with it.
Stay consistent with data entry
Enter transactions daily or weekly. This ensures your records are always current and accurate.
Consistently categorize transactions to maintain organized records and simplify tax preparation. When we start with a new client, one of the first things we do is set up categories for various types of income and expenses.
Reconcile bank statements monthly
Reconcile your bank and credit card statements every month to ensure your books match your bank records. This helps catch errors, omissions or unauthorized transactions early, before they can cause operational problems.
Promptly investigate and resolve any discrepancies.
Track receivables and payables closely
Regularly review your accounts receivable aging reports to follow up on overdue invoices and manage cash flow. Stay on top of accounts payable to avoid late fees and maintain good supplier relationships.
Document and backup everything
Keep all receipts, invoices and financial documents. This is crucial for tax audits and financial reviews.
Use cloud storage or backup software to make digital copies of important documents and protect your business in case of physical loss or damage.
Implement internal controls
Divide financial responsibilities among different employees to reduce the risk of fraud and errors (this is another great reason to use a professional bookkeeping firm—your financial data are kept private).
Even if you feel certain you can trust your employees, regularly review financial statements and reports to catch inconsistencies or suspicious activity early.
Understand basic accounting principles
Business owners, whether they do financial record-keeping in-house or use an outside partner, it helps to understand the basics of accounting, such as the difference between accrual and cash accounting, and why one method makes more sense for your than the other.
Ensure your bookkeeping practices align with Generally Accepted Accounting Principles (GAAP) for consistency and accuracy.
Prepare for tax season year-round
Conduct quarterly reviews of your financials to estimate tax liabilities and avoid year-end surprises. Quarterly reviews are part of the service at BookWerksTM. They can help you spot worrying trends that need to be addressed.
Keep detailed records of deductible expenses throughout the year to maximize your tax savings. BookWerksTM can set up a system for you to do this.
Budget and forecast
Regularly update your budget and compare it with actual performance to manage finances effectively. Use financial projections to anticipate future financial needs and plan accordingly.
Stay informed
As one of the best bookkeeping companies in Cincinnati, we help all our clients stay on top of bookkeeping best practices and new financial tools.
Continuous education helps keep your bookkeeping efficient and up-to-date.