Bookkeeping: 4 Tips For Entrepreneurs and Small Business
In the first few years of business, entrepreneurs typically have to wear 17 hats. This may mean working without personal pay, doing your own marketing, or keeping your own books. Advances in cloud based bookkeeping apps have made it cheaper and easier to do your own bookkeeping in these lean years. Below are a few steps to make your bookkeeping tasks easier.
1- Stop Commingling Funds
Mixing business and personal funds is almost a universal practice among entrepreneurs. There are several reasons to stop doing this, such as tax strategy and asset protection. Also, it just makes reconciling your transactions easier. Not only will you be reconciling fewer transactions, you will be able to leverage cloud accounting automation features more cleanly. This can take a lot of the manual work out of reconciliation.
2- Leveraging Bank Rules
Some better cloud bookkeeping apps out there offer bank rules. For example, in Xero, set up rules to auto-categorize transactions coming through your bank feed. As a result, you can quickly scan through the transactions for accuracy and approve those correctly categorized by the rule. This way takes a fraction of the time it takes to manually reconcile.
3- Use Your Bank Feed
This is an important one. Traditionally, you wait for your end of month bank statement, then reconcile for discrepancies. A bank feed hooks your online banking data up to your books, so the transactions feed into the accounting software. This eliminates duplicate data entry, and opens up the possibility of keeping your books current to the close of the last banking day. Because of this, there is no need to wait until the end of the month to reconcile.
4- Consider Integrated Apps
Xero is an open development environment. This means that 3rd parties can develop apps that integrate with Xero. Because of this, industry specific apps are popping up for industries like lawn care and home cleaning that update the accounting records as these apps are used. Now, estimates can become invoices and update sales and accounts receivable. Employee time clocks integrate with payroll to track wages, taxes, and mileage. In order for this to work, thoughtful set up in the beginning is critical. However, the efficiency and savings of an integrated accounting information system is well worth it.