4 Tips to Simplify Your Bookkeeping
Okay, you’ve decided to use Quicken 2014 to track your small business or rental property transactions, and that’s a great decision. However, doing this entails a certain amount of work and discipline on your part, which can feel overwhelming at times. To help make the bookkeeping process easier and less burdensome, here are a few easy tips and tricks to follow:
Tip #1: Regularly enter your transactions
Keeping up to date on your data entry reduces your work load. If you record transactions as they occur or soon after they occur, you’ll find it easy to do the data entry. And your data entry will be more accurate.
Don’t procrastinate and let your bookkeeping “inbox” get so full that it’s stressful or overwhelming.
Tip #2: Reconcile (consistently) any bank accounts
Here’s another easy, if predictable, tip. Reconcile your business or rental property bank accounts. That reconciliation work will mean your books are cleaner. That cleanliness makes the numbers more meaningful and useable for things like preparing tax returns or assessing profitability and cash flows.
One of the most common bookkeeping headaches that small business accountants encounter is bad bookkeeping that needs to be fixed at the very last minute so tax returns can be filed.
Almost always, these sorts of emergencies can be avoided by regular reconciliations through the year.
Tip #3: Periodically measure your profits
If you regularly (for example, on a weekly or monthly basis) prepare a profit and loss statement, also known as an income statement, you’ll usually get good insights into your business or rental property finances.
By regularly looking at your financial information in a summarized way, it also tends to highlight errors or problems in the data. That highlighting represents another advantage of regularly preparing profit and loss statements.
And an extra bonus: Not all the time, but regularly over the life of a small business or a rental property, looking keenly at your profit and loss statement data gives you powerful insights into ways you can make more money.
Tip #4: Semi-regularly produce a balance sheet
Get into the habit of preparing a monthly, quarterly, or annual balance sheet for your business or rental properties.
A balance sheet, which lists your assets, liabilities, and leftover “net worth” or owner’s equity, is a good way to assess your overall financial health. A growing net worth? Good! A shrinking net worth? Not so good. . .
And one other related remark: When you produce balance sheet reports, keep your eyes open for crazy numbers. Like a balance sheet that says you’ve got six million dollars in cash or that you’ve got 57 credit card accounts. Often times, bookkeeping mistakes (like incorrect data entry or forgotten transactions) show up first on your balance sheet as a crazy number.