How to spare yourself regret and thank your past self.
Bookkeeping is the act of organizing business data (primarily transactions) so that you can use this data for reporting and tax purposes. It is imperative to make sure that you do not cut corners. Otherwise, this will cause headaches in the future when you need your data to be accurate and have long forgotten what you did. Below is a list of tips that should keep you out of trouble.
- CYA (Cover your accounting)
- Leaving breadcrumbs (via memos and screenshots) and saving substantiation (copies) for everything you do will help you understand what you were thinking if any problems arise.
- Is means Is
- If anything is not adding up or not making sense, DO NOT ASSUME. Your books are an exact representation of every transaction from every account you have. If you are cutting corners via journal entries, you will kick yourself later.
When doing your monthly bank reconciliation, follow the bank statement exactly (line by line) so that you do not miss anything.
- Stay current
- Do not go changing a bunch of past transactions. Transactions from prior years should not be touched because they were already reported to the tax agencies. Also, transactions that have already been reconciled must not be adjusted or your beginning bank balances will be incorrect and you will not be able to complete your reconciliation.
- Separate business from pleasure
- Do not use your business accounts for personal expenses. All this does is make bookkeeping much harder and might cause you to report a higher Owner's Draw than otherwise. All expenses will be assumed to be a business expense.
- Start to finish
- Complete one task from start to finish rather than in pieces. This will allow you to keep better track of dates and deadlines.
- Auditing
- Auditing is a separate service from bookkeeping. Auditing goes back in time to make sure that what you have recorded is accurate. Bookkeeping, when it is done right, prevents the need for auditing in the future.