FAS 133 Accounting for Derivatives is difficult. Preparing a multi-state corporate tax return is difficult. Cost accounting for thousands of product lines is difficult. Keeping the books for a small business is easy as long as you stay organized, do not procrastinate and your books are setup correctly to start with.
Doing your own books will give you a thorough understanding of the expenses involved in running your company and it will also help you later as your company grows and you turn your bookkeeping over to a bookkeeping service or you hire a bookkeeper. You will know when an account doesn’t look right and you will know what questions to ask your bookkeeper.
If you don’t know how to setup your books, I recommend that you find a local Quickbooks expert or a remote accountant to get your chart of accounts setup correctly. They can also enter your first few transactions for you and give you some guidance on how to enter your information correctly. This would not cost you very much and could save you a lot of money that you would have to pay a CPA firm at tax time. For a small fee, you could also have them review your books once per quarter or every six months just to make sure everything looks like correct.
As a long-time accountant who has done a lot of bookkeeping and prepared a lot of financial statements, I think bookkeeping is easy and a lot of small business owners, especially ones just starting out, could probably handle it themselves.
But you need to be organized and you can’t procrastinate.
You should create a system that works for you and your schedule but I will explain what I do every day to keep the books up to date and accurate.
Reconcile the checking account every day first in the morning. If your business is really small, you should do it at least once per week. There are two reasons I recommend this.
You want to constantly be reminded of where you stand with your cash flow. A lot of problems in your financial statements can be prevented if you keep your checking account and your cash account in your accounting system in order. For example, maybe you wrote a check outside of your accounting system but forgot to record it in your books.
Open and sort the mail every day. Sort checks into pile one, bills into pile two and junk mail and everything else into pile three.
Make your deposit. I think it is important to be in the habit of getting the checks into your account ASAP. Go through the checks and prepare your deposit slip and don’t forget to enter all of the payments into your accounting software.
If you use receiving documents and purchase orders, match them to the vendor invoices and record them in your accounting system. This is a good time to review the invoices for quantity and price. If you see a problem with an invoice, I would recommend you still enter it but place the paper invoice into a special file to review with the vendor.
Generate invoices for any material shipped or services performed on the previous day. Email, fax or mail them on the same day they are generated.
Reconcile your credit card purchases. I have found that this step to be the most time-consuming step for me. I have tried several methods and what I have found is that it works best if you have two separate credit cards.
One credit card is used to purchased non-invoiced items like meals, gas and travel expenses. Use the other credit to pay for items that have already been entered into your accounting system. Some vendors will let you take 30 days or more to pay and then will accept credit card payments.
There are always other accounting issues like payroll and journal entries, but if you make these six steps a part of your daily or weekly routine, you will save you self a lot of trouble and headache later.
At some point you may consider transferring the accounting responsibility to someone else. You should probably move the accounting to a professional when the bookkeeping activity is impacting the time you need to make sales visits or build the business.
When my wife and I bought our house we need to paint all of the interior walls. We could have painted them ourselves but between working full-time and caring for two young children, it would have taken us a couple of weeks to do it by ourselves and painting is not a task that I enjoy. We decided to hire a painter to do it for us and it took him a little more than one day to finish and it looked better than what we could have done it ourselves. We were able to move in soon after and start enjoying our new home.
Another reason for not doing your own bookkeeping is that there is a lot of repetition with bookkeeping. You need to have the type of personality that is ok with doing the same thing day after day after day.
If the bookkeeping becomes a grind that is keeping you from creating more sales or working on your business, and you can absorb the additional cost, it is probably time to interview a bookkeeper or hire an outsourced bookkeeping service.
Just remember that a monthly bookkeeping fee is a fixed overhead cost that you would need to cover with additional sales or reduced expenses. Unless your business is making a profit, you may not be able to afford outside bookkeeping help. Until then, I think you can and should work on your own bookkeeping.
Let me know what you steps you take to stay on top of your bookkeeping.