Bookkeeping is a vital aspect of running a business of any size, whether you’re a sole proprietor or the owner and manager of a company with hundreds of employees. From determining expenses and revenue to accurately filing business taxes and payroll, no business can be operated effectively without accurate bookkeeping.
Bookkeeping can be challenging for every business, with unique hurdles depending on size, business complexity, finances and industry. A large business with diverse product lines and multiple locations can have complex accounting needs, while a small business owner might have to deal with the unique challenge of managing all the bookkeeping tasks themselves.
No Phoenix business has it easy when it comes to bookkeeping – unless you outsource it. Although we would be happy if every Phoenix business outsourced their bookkeeping to our dependable and dedicated team at H&H Accounting Services, we understand that many business owners, especially small business owners, would prefer to handle the task themselves.
We would argue that your time is valuable, and it may turn out that the opportunity cost of DIY bookkeeping makes outsourcing the less expensive approach. This is doubly true if you consider the cost of software and tools.
Regardless, we know there are many business owners who believe in the DIY approach, and we do have some tips that might make your life easier.
Set aside time monthly, or preferably weekly, to review and organize receipts, invoices and all financial statements. Updating and organizing your records 52 or 12 times a year makes errors much less likely than doing it just once annually at tax time.
Adopt a filing system that works for you, whether physical or digital, to categorize documents according to type and date. If you primarily rely on physical recordkeeping, you may want some form or digital cloud backup in case of damage.
Anything you can automate, like invoicing, payroll and expense tracking, will reduce the likelihood of errors, save you time and make the bookkeeping process far easier. You should be able to set up automatic bank feeds in your accounting software, so inflows and outflows are constantly updated, which will simplify reconciliation.
You should be reconciling your accounts at least once a month when you receive either physical statements or email statements. This is another task you can likely do weekly given modern mobile and online banking tools. This allows discrepancies to be caught early and rectified quickly. This is always preferable, as it can be difficult to resolve those types of discrepancies if the issue occurred eight or 10 months prior.
There are a variety of expense tracking apps and accounting software platforms with companion mobile apps that enable streamlined automation. These tools can virtually eliminate the risk of missed expenses or lost receipts.
Even if you’re a sole proprietor, it’s often best to separate your personal finances from your business finances. This means separate bank accounts and credit cards. Doing so can greatly simplify bookkeeping, reduce confusion and the chance of mistakes, and can make tax filings far easier.
The most important tool for bookkeeping is accounting software. QuickBooks Online is a popular option. The cloud-based software allows for easy invoicing, expense tracking and financial reporting. The basic features are relatively user-friendly for small to medium-sized businesses, but the more advanced features can be difficult to master or make full use of.
Xero is a similar cloud-based option that can help with everything from bank reconciliation to inventory management and project tracking.
Wave, an alternative software that offers invoicing, receipt scanning and financial reporting, has a free bookkeeping starter tier as well as a paid pro plan. The free version lacks the polish and some of the features of the paid alternatives but may be ideal for small businesses, sole proprietors and freelancers.
Expensify and Shoeboxed are examples of apps that allow you to scan and organize receipts and other documents. They even have tools for tracking mileage and granularly categorizing expenses to make reporting and tax preparation easier.
Your choice of payment processing can be an important one. Square and PayPal can integrate with bookkeeping tools and allow for fast or even automatic payment and sales tracking. Be cognizant of fees and how they’re calculated, as well as both your user experience and the customer user experience with each platform’s features.
Being able to accurately track time can be particularly important for businesses, especially when it comes to billing. Both FreshBooks and Toggl can simplify billing and can integrate with other accounting software.
The truth is it’s hard to do bookkeeping efficiently and accurately without using several different apps and accounting platforms. Each of these tools can take time to master, and many don’t have reliable free or low-cost alternatives. In addition to enhanced accuracy, easier business tax filings and saved time, hiring a bookkeeper can save you the cost of wrangling a half dozen subscriptions for different bookkeeping tools.
If you’d like to find out of outsourcing bookkeeping makes sense for your business, we encourage you to call H&H Accounting Services at (480) 561-5805 for a free consultation.
