Top 25 Bookkeeping Tips From the Pros

1. Stay Confident in Your Bookkeeping Strategy

Jennifer Warawa, EVP of Partners – Accountants & Alliances, Sage

When it comes to bookkeeping, confidence in execution is key. As small business owners who may be taking on bookkeeping for the first time, it’s essential to feel secure in your company’s bookkeeping and compliance. Bookkeeping can be an overwhelming task, but there is a proper solution for your unique needs. If you are questioning your ability to strategically guide your small business in its accounting practices, a collaborative partnership may be ideal. Especially as technology and opportunity for data analysis in accounting evolves, don’t be afraid to ask for help from an expert. For example, sometimes bookkeepers don’t do taxes or they don’t have their CPA designation, so they may choose to partner with a CPA.

2. Use Bookkeeping to Track Performance Against Plans

Healy Jones, VP of FP&A, Kruze Consulting

One bookkeeping tip that many business owners may not think about is tracking performance against a plan. Having a financial forecast or budget, and tracking your monthly progress against that plan, should be a key part of your bookkeeping process. Good bookkeeping shouldn’t be just about knowing what you’ve done, it should be about helping you know where your business is going. Work with your CPA to build a budget and revenue forecast. Then, compare what your actual results are versus the budget, and use that information to improve your company’s performance. For example, if a particular product line is growing well and providing good margins, consider putting more market money behind that product.

3. Have Immediate Access to Financial Data

Kurt Rathmann, CEO & Founder, ScaleFactor

Find a solution that gives you real-time data. If your bookkeeping is constantly behind, it becomes increasingly difficult to make strategic decisions or analyze the health of your business when you need to most. No matter where you are in your business’ journey, immediate access to critical information like cash flow forecasts based on outstanding accounts receivable and accounts payable will allow you to make smarter choices about how to grow.

4. Classify Your Employee Status Correctly

Leslie Harding, Bookkeeping Expert, Pilot

Companies tend to have full-time staff, part-time staff, contract workers, or a combination of all three. Properly classifying employees and ensuring that they remain compliant with federal and state tax rules is crucial to avoid costly and disruptive mistakes at tax time.

5. Schedule a Monthly “Bookkeeping Time” in Your Calendar

Logan Allec, CPA & Owner, Money Done Right

Some business owners get behind on categorizing the transactions in a bookkeeping software. And if you wait too long to do your bookkeeping, you may forget what certain transactions were for, making it necessary to go through your receipts one by one. This unnecessarily prolongs and complicates the bookkeeping process. Rather than doing bookkeeping whenever you get around to it, you should set time at the end of every month to do your bookkeeping. It’s far easier to keep to a monthly bookkeeping schedule if you set it for the same day and time every month. Doing so will help ensure that the bookkeeping process is as efficient, painless, and accurate as possible.

Small business owners who want to save money on bookkeeping can also get access to tools through free accounting systems. To learn about systems that are available for small business owners, be sure to visit our list of the best free accounting software systems.

6. Use Section 179 to Decrease Taxes in the Short-term

Ken Boyd, CPA, CPA Exam Guy

Normally, when filing taxes, you depreciate the cost of an asset year on year during the useful life of that asset. Section 179, a tax deduction in the IRS tax code, was designed to encourage businesses to invest in assets that will help them grow. It allows you to write off the entire purchase price upfront, in the first year, for qualifying assets (mainly equipment and software—you must begin using them during that tax year). For most businesses, this is preferable to straight-line depreciation because it means a considerably lower tax bill during the year in which the purchase is made. It’s well worth familiarizing yourself with section 179 and finding out whether your purchases are eligible, as it may well impact on the purchasing decisions you make. As always, if you’re unsure or need assistance, consult an accountant.

7. Perform Daily Transaction Monitoring

Andrew Desiderio, CPA, Senior Manager, Concannon Miller

Every day, match your cash deposits made by your business with the cash receipts shown on your bank statement. Are your employees depositing cash on the proper schedule? Do the amounts recorded as deposited match what was actually deposited?

Daily match your cashless deposits. If you are getting deposits from all of your card companies through your merchant services provider, do the deposits match what was recorded on your ISP? Have your merchant services fees changed over the course of the month or the year? If so, find out why.

Daily match your check, disbursements, and payments activity. Do your checks paid match the dollar amount and payee name? Do your payments match your invoices? Do you have any unauthorized payments via check or ACH on your account? Performing daily monitoring such as these will help keep your bookkeeping up to date.

8. Keep Personal Finances Separate

Steve Pritchard, Founder, Cuuver

You should keep your personal finances completely separate from your business. When you start your own business, you are usually responsible for pretty much everything, which includes bookkeeping. To make life easier for yourself, it’s best to set up a separate bank account for your company. This will save you a great deal of time and energy when sifting through your expenses, because you won’t need to filter out any personal purchases you have made. It’s also a good idea to have a separate credit card for your business, so when you’re going through your invoices and receipts, you will know that all the expenditure has gone on business-related items, helping you to speed up the bookkeeping process.

To learn more, see our review of the best business checking accounts.

9. Track Financial Data on a Monthly Basis

Deborah Sweeney, CEO, MyCorporation.com

It’s important to keep track year over year and based on month so you can evaluate seasonality, anticipated trajectory, and growth. If you track monthly based on category of income, it can help you see which areas of your business are increasing, which are decreasing, and areas for potential improvement. You may also find areas where you should invest more because your ROI is higher in particular areas. It’s important to not just track annual numbers, but monthly and quarterly as well to assess them in the shorter term as well as over time. There may be small fluctuations, but this helps you build trends.

10. Choose Your Accountant Wisely

Steven J. Weil, Ph.D., President & Tax Manager, RMS Accounting

Choose your accountant carefully. Don’t just look for the lowest fee. It’s much more important to get someone with not only the experience to assist you in finding every deduction and tax advantage available, but someone who also will be available to spend time with you learning about your business and teaching you how to get the most out of it.

11. Hire a Professional Payroll Service

Ken Stalcup, CPA, CFE, CFF, ABV, Senior Director, Houlihan Valuation Advisors

Many small businesses will hire or farm out payroll processing. Business owners should know that payroll compliance and payroll taxes are complicated processes. If you make a mistake, you could end up being penalized by the IRS. It’s best for small business owners to use a professional payroll service to ensure accuracy in the process and mitigate risk.

For more information, read our article about the best payroll services.

12. Correct Errors as Soon as You Find Them

Yuko Kawamoto, Finance Staff, Founder’s Guide

If you find any discrepancy when reconciling your books, try to resolve it as soon as possible—no matter how small the discrepancy is. Find the source of the error and have it corrected immediately. Do not let the discrepancy be carried over to the following months, as it will just get bigger and it will be more difficult to correct it. Make sure your books are accurate and up to date from the start.

13. Invest in a Quality Document Management Solution

Jeff Muyrong, EA, Tax Advisor & Bookkeeping Consultant, JBM Tax & Bookkeeping Services

When it comes to managing a business’ finances, keeping documents organized is the key to maintaining accurate and reliable books. It’s best to invest in a quality document management solution to help streamline and simplify the process of managing financial documents, such as day-to-day expenses, payables, receivables, receipts, and invoices. This will significantly help you reduce the amount of time spent working on your reconciliation. It also allows you to exchange and share files with your accountant—from receipts to invoices to tax forms.

14. Don’t Overlook Managerial Accounting

Stewart J. Guss, Founder, Stewart J. Guss, Attorney At Law

Many small businesses tend to focus their accounting on taxation and compliance. That’s fine, and obviously necessary, but it’s also important to work with your accountant and bookkeeper to ensure that you have measures in place to allow for managerial accounting. If you have the ability to access and manipulate your accounting data in a way that readily informs your business decisions, it can help you plan for growth.

When small businesses get started, they are typically in “crisis mode,” simply trying to cope with operational challenges as they come to them. However, entrepreneurs should take the time to structure accounting categories and procedures that allow for easy analysis, trend spotting, and business planning, in addition to simple tax compliance. The benefits of making time to create a more robust accounting infrastructure from the start will return exponential benefits, allowing easy scalability and growth.

15. Hire a Reliable Bookkeeper

Yasuyo Takeo, Co-owner, SkateYogi

Realize quickly that bookkeeping is not your thing and your employees may not be able to do it either. If you know from the start that you have no bandwidth to deal with day-to-day bookkeeping, it’s best to hire a reliable, professional bookkeeper to help make your life so much easier by staying on top of your bookkeeping needs.

16. Consider Accepting Digital Payments From Customers

Jeremy Almond, CEO & Co-founder, PayStand

If you run bookkeeping at your companies (accounts receivable and payable), consider accepting digital payments from your customers. You can automate your payment system and help streamline the job of bookkeeping. This takes place in the form of eCheck, mobile payments, ACH, or even bitcoin.

17. Don’t be Afraid to Ask Questions

Matthew Gillman, CEO, SMB Compass

An important tip is to ask questions when you don’t know the answer. Properly categorizing revenue and expenses is important and can save you and your accountant a lot of time at year end. Don’t forget, your accountant bills you for the time they spend, so take advantage of this by learning what you don’t know – ask questions. By staying on top of your bookkeeping, you’ll be able to focus on your weaknesses, efficiently manage expenses, and be better positioned to grow your business.

18. Use Cloud Accounting Software

Lee Reams II, CEO, ClientWhys

Cloud accounting and bookkeeping applications bring real-time reporting to small business owners. This automates much of the tedious bookkeeping functions, but does not replace the need for expert accounting guidance. The saying “garbage in” equals “garbage out” rings true for bookkeeping.

For more information about available programs, be sure to check out our list of the best accounting software systems.

19. Keep Your Records Organized

Dave Du Val, Chief Customer Advocacy Officer, TaxAudit

One of the most important bookkeeping tips for small businesses is to stay organized during the entire year so you are not scrambling like a rabbit at a greyhound race track come tax time.

• Gather up and organize receipts and other required documentation, such as mileage logs.
• Gather documentation for furniture and equipment purchases.
• Check all 1099-K forms for accuracy and report them on your tax return. Wait to receive them before you file.
• Prepare to list all income received, including cash, checks, credit cards, PayPal, and bartering income.

20. Document & Deduct Expenses That Are for Personal & Business Use

Joshua Zimmelman, President, Westwood Tax & Consulting LLC

If you use something for both business and personal purposes (such as a cell phone), you can deduct a percentage of the expenses on your tax return based on the percentage of business use, but you’ll need detailed call logs and other documentation to back that up. If you use your car for your business, keep detailed records and include your mileage log in your bookkeeping so you can deduct a percentage of your vehicle expenses on your tax return.

21. Maintain Detailed Inventory Records

Lou Casale, Head of Communications, Hiscox USA

Small businesses often don’t have the benefit of a large staff to take care of tasks like inventory maintenance, which are important but often overlooked. Having a proper inventory management process can help small businesses prevent employee theft or misplacement of merchandise. These records can also help businesses track customer shopping trends and ensure efficient buying in the future.

22. Invest Time to Learn Simple Bookkeeping Processes

Sarah Webb, President & COO, Plaid for Women, Inc.

Before investing in expensive payroll software for just a few employees, spend time learning how to calculate it yourself and set up an Excel schedule. Then put a reminder on your calendar for all the due dates: payroll dates, federal filing dates, and state filing dates. This will save you tons of time and more importantly, money, by doing it yourself. Still let the pros calculate your annual returns, but save money on the smaller stuff.

23. Go Digital With Your Payroll

John Waldmann, Co-founder & CEO, Homebase

The best bookkeeping tip I can give to a local business is to ditch the paperwork and go digital. Too many local businesses are still using paper to manage their hourly employees. By using a software solution, local business managers and owners can eliminate paperwork, store their employee records in the cloud, and import hours directly into payroll and accounting software. This makes running payroll a breeze, simplifies bookkeeping, and saves hours each week for busy owners and managers.

24. Create a Simple but Functional Chart of Accounts

Crystalynn Shelton, Accounting Specialist, Fit Small Business

The chart of accounts is a list of accounts that are used to categorize every financial transaction that your business generates. Your chart of accounts will reflect your entire operation, which is why it is considered the backbone of your bookkeeping system. Accounting software usually comes with a preset of list of accounts that will start you on your way, but as your business grows, you need to know how to modify your list. Some of the main things to remember when creating your chart of accounts are:

• Set up accounts that you need and nothing more. Don’t over-categorize.
• Keep them generic. Instead of creating accounts with customer or vendor names, it is more functional to list an account per type of transaction instead.
• Make sure to select the correct account type for each account, or there will be errors in your financial statements.

For more information, please check out our small business bookkeeping, accounting, and tax guide.

25. Use Apps to Support Your Cloud Accounting Software

Jelena Arkula, President, Books LA

Cloud accounting software is connected to your bank on a daily basis, and fetches the transactions that line up in the queue to be assessed and addressed. This eliminates the old-fashioned manual entry. By using cloud accounting software along with these three apps, your manual work will be cut significantly:

1. Hubdoc: Connect your bank accounts, utilities, dues, and subscription accounts and let Hubdoc fetch those documents daily. You will no longer have to fetch the statements, copies of the checks, and bills. You can also download reports and documents when you need them.
2. Receipt Bank: Use this app to capture the receipts you have. Once the app is connected to your accounting software, the app will recognize if the receipt already exists among the transactions, or it should be added.
3. MileIQ: Using your car for business? Use MileIQ. This easy-to-use app will save you a lot of time and headache, and will log the trips automatically. You just have to categorize them by swiping left for Personal and right for Business. The IRS accepts this app as a valid log for mileage claims. This app will also pay for itself by logging every trip you had, not just the ones you remember.