How to keep your Books up to date?
First you need to remember the old saying: Time is money! So, what is your time worth to you? If you are spending more than 5+ hours a month on your bookkeeping, than you might want to hire someone to take care of it for you.
Now let’s understand what the term books mean: Books is another term for bookkeeping to produce financials. Your finanicials are: Profit and Loss (aka Income Statement), Balance Sheet and Cash Flow Statement. As all 3 of these are important, the one we are going to focus on is the Profit and Loss Statement. This one tells you how much sales your got paid for, and how much you spent (which are taxable expenses, not all expenses are taxable) subtact the two and you find out if you made a profit or a loss.
This can be done by using an accounting software, excel, or if you really want to go old school, general journals, it is your choice, especially if you are the one doing it. Do what makes sense to you. The most important thing that you need to do, is to do it! Depending on the business, they can be done monthly, bi-weekly, weekly, or daily. No matter how you have it set up, where you have it set up, or if you hire to have them done, just make sure they are done and reviewed on monthly.
Now that you have figured out how you are going to do them, and how often you are going to get them done, you might be wondering about each transaction in a category. Advertisement, auto expense, bank fees, are for paying a loan (you split up the transaction to identify how much went to principal and how much went to interest), etc. Reconcile your bank statements and credit cards statements, to make sure every transaction was put into a category. If you don’t know, label it “Ask Accountant” so your accountant can help you identify where to put it properly. Two categories to avoid using: Miscellaneous and Uncategorized, these will cause red flags, and more than likely be flagged for an audit by the IRS.
If you find yourself more than a couple of months behind, than you might want to hire someone to take care of it for you. When you do hire someone, let me them take care of it for you, and meet with them once a month to go over the “Books!”
If you want to know more about bookkeeping or our other services, give us a call or set up an appointment online! https://go.thryv.com/site/pinabiz