How Do I Clean Up My Accounting Records?

We get it. Accounting and bookkeeping are complicated.

Small business owners come to us all the time with questions like:

“How do I clean up old QuickBooks transactions,” “How do small businesses maintain their accounts?”, “Why is bookkeeping so hard?”

Your time running a business isn’t best spent reconciling transactions or cleaning up balance sheets. You simply don’t have the time to focus your energy on accounting, and maybe because of it, your financial records have gotten a little chaotic and messy.

It happens. But should it KEEP happening? No. Unchecked messes can devastate a small business. Having impeccably clean books is everything.

For your business to survive and thrive, you MUST have clean account records and books. You should be able to access your business finances at the drop of a hat if need be.

Let’s take a look at some things you can do to clean up your chaotic bookkeeping.

Table of contents:

• Are your personal and business accounts separate?
• My software receives transactions from my bank feed; why are none of them reconciled?
• How do I clean up old transactions in my accounting software?
• Is the balance sheet you manually keep track of missing entries?

Are your personal and business accounts separate?

As mentioned in our previous blog, entrepreneurs shouldn’t blend their personal and business accounts.

Every small business needs to have its own business account, period. Several banks offer low to no-fee, interest-earning accounts for small businesses, and almost all of these accounts have ATM accessibility and online/mobile banking tools.

“It will save you lots of headaches down the road if you keep your business and personal banking transactions in separate accounts. You should run all business transactions through a business bank account or credit card. Personal expenses should be kept separate.” — Sarah Sinicki, Director of Business Development, Team 80 Small Business Accounting and Bookkeeping

My software receives transactions from my bank feed; why are none of them reconciled?

You understand the importance of reconciliations. You know that when you don’t conduct regular bank reconciliations, you lose insight into how well your business is doing. You integrated your bank feed with your accounting software for this reason.

But what if your accounting system shows you’ve reconciled nothing? There’s a good chance you thought integrating your bank feed was all you had to do.

Unfortunately, that isn’t the case.

Importing transactions is only part of the process. No accounting software will do all the work for you. You still need to review, enter, and code each transaction into the correct general ledger account every time.

Compare transactions in your software with the same ones on your bank statements. Once you have reviewed everything, the difference between the ending balance in your accounting system and your bank statement should be $0.00.

How do I clean up old transactions in my accounting software?

Keeping your financial records clean is crucial for financial health visibility.

Purging old transactions by either deleting or voiding them out is a perfect way to unclutter and refine your reporting accuracy.

Doing so will ensure you have a true sense of where you stand when it comes to your finances.

“If you are going to clean these transactions yourself, you need to make sure all transactions from your bank and credit cards are entered and coded in your accounting system correctly. The bank balance on your statement should tie to your books each month. If not, you will need to investigate and find out where the discrepancy is coming from.” — Sarah Sinicki

Is the balance sheet you manually keep track of missing entries?

You’re busy running your business. And you might forget to track an expense.

Errors happen - it’s human nature. But, when transactions fall through the cracks they can be hard to detect later. If you use an accounting spreadsheet, the best thing you could do is set it up as a check register, where you can enter each transaction and ensure it mirrors the bank statement like you would with your personal bank account.

As a quick fix, this method will suffice. In the long run, it won’t serve you well. For your business to grow, you need to invest in an accounting package and maybe consider hiring accounting professionals for help.

There is a lot at stake. If you make a mistake, you could be setting yourself up for incorrect tax filings or penalties.

If you don’t have the time, and you know you’re out of your element, it’s time to outsource your accounting to a trusted team.

We would love to bear your accounting burden! Get in touch with us today!

by Jim Casart

8 Easy Accounting Tips to Help Small Businesses Maintain Their Books

Accounting is the language of business. Understanding that language is an essential part of keeping your small business alive.

Being a small business owner isn’t easy. And neither is being an unofficial accountant.

With the hectic day-to-day operations of running your business, how can you possibly make time to learn bookkeeping? The idea of sifting through endless stacks of financial documents and ledgers sounds overwhelming.

Still, you understand the importance of not letting your accounting fall behind. Because maintaining accurate financial records is vital to the health of your business.

That’s why you’re asking Google questions like, “how do small businesses maintain accounts?”

These simple accounting tips will help you and your labor of love succeed!

8 Easy Small Business Accounting Tips

1. Invest in an accounting system
2. Keep business and personal expenses separate
3. Don't wait until the end of the year to do your accounting.
4. Meet with your CPA throughout the year.
5. Look at your financial statements monthly.
6. You need to understand your cash flow.
7. Create a budget.
8. You should hire a professional.

1. Invest in an Accounting System

Small business owners with no accounting experience need a reliable accounting system because that system is often the difference between success and failure.

Many affordable options will simplify data and organize your financial information to track expenses, income, and other activities easily. Xero, Quickbooks, Intuit, and Wave Financial, are just a few of them. You can even link your bank and credit card accounts directly to the software.

An accounting system makes your life easier and helps you to focus on business growth.

2. Keep Business and Personal Expenses Separate

New entrepreneurs often dip into their personal bank accounts in the early stages of business development. The practice of intermingling expenses can be problematic for many reasons.

Here are some of those reasons:

• Personal and legal liability
• Tax implications
• Audit trail issues
• Bookkeeping problems

You can avoid these issues by opening a business bank account and establishing separate credit card accounts. Keeping personal and business accounts separate also improves your business credit score, helping you secure better business loans and reduce business insurance costs.

“Run all business expenses through the business, and pay all personal expenses from a personal account. Trust me, your CPA will thank you at the end of the year. You don't want to spend lots of extra money untangling combined finances.” - Sarah Sinicki, Director of Business Development, Team 80 Small Business Accounting and Bookkeeping

3. Don't Wait Until the End of the Year to do Your Accounting

Do you remember January’s expenses when you wrap up accounting in December? You probably don’t.

Business owners will too often make the mistake of waiting until the last minute to start thinking about their accounting. And they usually suffer from financial troubles as a result because waiting can cause significant issues.

You can handle most finances monthly.

Taking control of your finances and keeping bank reconciliations up-to-date monthly saves you from frantically scrambling at year’s end. We suggest you set a schedule so that you are touching financials monthly.

Well-managed finances close the door to preventable errors.

4. Meet with your CPA throughout the year.

You should meet with your CPA to review your books no less than twice yearly to ensure nothing falls through the cracks.

Meeting at least twice a year also helps your CPA understand your business. The person handling your finances should know your company inside and out.

Be proactive. If you meet with your CPA at least twice a year, they’ll have time to review your finances, uncover missed details, and devise effective strategies that you can implement to help your business before the deadline.

Don't wait until tax time; it could already be too late.

5. Look at your financial statements monthly.

We can’t overstate the importance of understanding the real-time financial health of your business.

Understanding your financial statements helps you discover where your business stands today and where it’s headed. It’s also an excellent way to learn if operations are running smoothly.

It's also essential to always understand your profit margins and net income. Generating a monthly profit and loss report and reviewing revenue and expenses is a best practice we advise.

Never neglect your balance sheet since it shows your cash balance, outstanding accounts receivable, and all other assets and liabilities. Your balance sheet is a current snapshot of your business’s financial health; use it, love it.

When you stay on top of your financial statements, you’re empowered to make timely strategic business decisions. These decisions can help business thrive today and into the future.

6. You need to understand your cash flow.

Small business owners that don’t track cash flow are on the fast path to becoming former small business owners.

You must understand and optimize your cash flow because cash flow measures the real-time movement of dollars in and out of your business.

Your cash flow is positive when there’s enough money in your business account to pay bills. If cash is rapidly dwindling, you could have a severe problem.

Cash flow visibility helps you grow operations strategically. You can start by monitoring and documenting your incoming and outgoing funds using your accounting system.

You should also prepare a cash flow projection looking two to three months out to avoid surprises. If there are cash flow constraints, it’s time to leverage a business line of credit.

7. Create a budget.

You can use your financial statement and cash flow information to create a budget aligned with your business’s economic trajectory.

Every entrepreneur should develop a budget. It’s an essential tool for financial tracking, especially for smaller businesses with limited funds that can benefit from operating within their means. A realistic budget can also help you understand the appropriate actions to take when problems arise.

Budgets help you anticipate future needs like repairs, expansions, and improvements without relying on credit. Accurate budget forecasting can also help you plan for staff hires and product and service investments and establish earnings and sales goals.

“Even a poorly executed budget plan is better than no plan at all. Take some time and plan out what you think your revenue and expenses for the upcoming year will be. Then compare the budget to the actuals monthly. The variances in these numbers can give you some great insight.” - Sarah Sinicki, Team 80

8. You should hire a professional.

It is okay to admit when you’re in over your head - it’s also understandable. You didn’t launch a small business to become a full-time accountant. 

You started your business because you’re passionate about your offering, and you want to provide customers with exceptional products and services.

You should focus on growing your business and serving your customers. And that’s not possible when you’re mired in book balancing, payroll management, financial forecasting, and tracking your accounts payable and receivable.

We want to do this work for you. Get in touch with us today!

by Jim Casart