Here’s How Your Bookkeeping Routine Should Look

It’s easy to set aside things that you don’t have time to do. Bookkeeping can be one of those things that you put off. While it might seem good in the moment, it is stressful in the long run.

You might think I can do it later. But think of the grasshopper in the popular Aesop’s fable “The Ant and the Grasshopper.” Waiting to do your books at the end of the year doesn’t end well.

There are a lot of headaches that come from retrieving several financial documents. Doing everything in one setting can be overwhelming.

So instead, it is better to set aside time every period to record your transactions in the books. But this task is easier said than done. So, how do you, as a busy business owner, do your books?

Set up a weekly bookkeeping routine

As a business owner, you have a routine. You probably get up at the same time every day. You probably have goals you reach weekly. Bookkeeping is no different.

It’s a routine that requires balance. Like working on areas like relationships, spirituality, fitness, etc., there are also several angles to look at concerning your finances.

Recording Weekly Bookkeeping Transactions

Unless you don’t have clients or expenses, there will be income you are earning and money you owe. You will need to keep your documents stored in the right financial software or ledgers.

It is important to keep your business and personal finances separate. It is necessary to open a separate bank account where all of your business transactions can be easily recorded.

Reviewing your Income and Expenses

While software has made bookkeeping much simpler and less time-consuming, there are still times when issues occur. The software can sometimes confuse transactions.

It is necessary to go through and make sure each recorded transaction is in the right accounts. You will also need to check other details like…

• The vendor/payee name
• The type of transaction
• The date when the transaction occurred
• Whether the bank matches your software

Reconciling your books to match your records

There are times when the books will not balance. There may be a discrepancy. In which case, you will need to match the transactions in your software to the corresponding documents.

Seeing unmatched records can be frustrating. But this is why, before you close the books, you check each transaction and match it.

Set up a Monthly bookkeeping Routine

After you record the monthly transactions, review them to fill in more details. And make sure your finances match your records—it’s time to close your books for the month.

This is where you can start to see how well your business is doing for the particular period. In this case, the monthly profits and losses.

Here is how you can check in on your financial health to see whether your business can continue for the foreseeable future or where it needs improvement.

View Important Documents

There are several documents you can view as a business owner. Most bookkeepers focus on three core statements.

• Balance sheet: highlights your assets, liabilities, and equity, ensuring they are balanced.
• Income Statement or P&L: shows all revenue and expenses over a period of time.
• Cash Flow Statement: used to track cash inflows and outflows to evaluate liquidity.

Understanding Your Profit and Losses

While the balance sheet ensures your assets, liabilities, and equities are balanced, the income statement shows revenue and expenses.

The formula for this statement is simple…

“Revenue – Expenses = Net Profit”

How to make financial decisions

You could use the income statement to understand your finances. But every statement is used for the purpose of ensuring overall financial health.

The balance sheet and the income statement are simply snapshots of everything holding your business together financially.

But these statements do not tell you what expenses you may still owe or account for income that you have not yet been paid.

Ensure you are tax-ready

It is recommended that you put aside some money for tax purposes. In some cases, that may be 15% of your income.

But that is not always straightforward. So others recommend setting aside one-third of your income monthly.

Why you need to keep detailed records

Your business depends on your finances for a variety of reasons. All of which are connected to its survivability and structure.

Bad financial outcomes can occur when you don’t understand your profitability. You will not only miss out on opportunities to expand, but you will also risk facing legal challenges.

Let’s explore some benefits of keeping your books accurate and up-to-date.

Organized finances create clarity

How can you make financial decisions if you are not sure about what you are earning?

When you are clear on your expenses and your profits, it is possible to do two things for your business.

1. Focus on the products and services that are earning the most profit
2. Eliminate expenses that are not helping your business growth

Recording consistently prevents overwhelm

At the end of the year, whether you record your finances or not, accountants will need to see some documents.

Waiting till the last minute to get everything in order can be frustrating. But when you record everything as it comes in or goes out, you will be more at peace.

If you choose to hire either a bookkeeper or an accountant, the relationship you build with them will be much simpler. Vs. Having them clean up your books.

Everyone will be happier

Bookkeepers and accountants can profit from your disorganized finances. But we’d rather that everything run smoothly.

Why? Simply, it’s much easier to work with someone who already has a clear grasp of their financial health.

If your rhythm is consistent, the flow of finances in and out will be much smoother.

Should you do it yourself or hire someone?

Some businesses are happy doing their own finances. While others do it simply because they can’t afford a bookkeeper.

Deciding whether to DIY your bookkeeping or to delegate is an important decision every business must make.

Pros and cons of hiring a bookkeeper

Coaches and consultants often outsource things due to time constraints, but there are many pros to hiring a bookkeeper.

• Professional financial services
• Reliable record keeping
• Strategic financial decision-making
• Year-end tax prep

There are definitely cons when it comes to hiring a bookkeeper.

• The cost of a bookkeeper
• Not knowing who to rely on

Pros and cons of DIY bookkeeping

I get it; you don’t have the money to hire a bookkeeper. Or you just don’t know who to trust. The cons of DIY sometimes outweigh the pros.

• It can take a lot of time
• Organizing your finances can be a pain
• You are too overwhelmed to focus
• It’s hard to make the right decisions

But there are pros that are debated when it comes to DIY bookkeeping.

• It’s cheaper to do it on your own
• You can control your own financial outcomes

Businesses all have different reasons for choosing their way of doing bookkeeping. They might hire one to outsource work or choose not to due to finances.

Are you looking for someone to help you?

Earning profit is the lifeblood of every business. Without it, you are running on empty.

Not every business can afford a bookkeeper. Just as I mentioned above.

But if you are looking for one, how can I help you?

Recording weekly transactions

If your business is doing well, you are earning something weekly. There are also expenses you will need to record.

Each transaction needs to be categorized so that your books are easy to navigate.

QBO software does make bookkeeping simpler. But as a business, you still need to go in and check every transaction.

Adjusting Monthly Transactions

Your statements show a balance, aka the balance sheet. And show your net profit.

Sometimes, there can be other incomes or expenses not yet factored in. Below are some adjustments made to the books.

• Accruals: Revenue you have not yet earned or expenses not yet paid
• Deferrals: Income for services not yet performed or money paid for expenses not yet received
• Depreciation: Over every period, certain assets need to be adjusted.

Reconciling your monthly finances

Not everything will be balanced the first time around. This requires some digging.

Your books, whether you have a ledger or software, need to be matched to records.

When everything matches, then it is time to close the books for that period.

Whether you decide it’s time to hire a bookkeeper or not is up to you. But a good bookkeeper is invaluable.