056 Mastering Bookkeeping: A Simple Three-Step Method for Small Business Success
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Streamline your business's financial success with Regan Bashara as she reveals the key steps to conquering bookkeeping chaos and unlocking financial clarity.
In this episode:
Mastering bookkeeping ensures financial stability and growth.
Skillfully categorizing transactions leads to precise financial insights.
Reconciling accounts safeguards against errors and potential fraud.
Reviewing financial reports unveils crucial business performance indicators.
Access resources and training for effective bookkeeping implementation.
Financial organization is the key to success in business. By categorizing your transactions, reconciling your accounts, and regularly reviewing your reports, you'll have a clear picture of your business's financial health and be able to set and achieve your goals. - Regan Bashara
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00:00:00
Hey, everybody. Welcome to money through ease. I'm your host, Regan Bashara. I'm the numbers witch and a small business bookkeeper. And this week's episode is going to be how to do Your Bookkeeping in 2024.
00:00:13
Let's dive right in. I'm going to be sharing with you the three steps that you need to do every single month to keep your business's bookkeeping up to date and end. Correct. Why do we need bookkeeping in the first place? Well, at least as far as the United States businesses go, you got to file a tax return every year.
00:00:34
If people are paying you money for your products or your services that you offer, you need to be filing that on your tax return. Every single business needs to have bookkeeping. Whether you do it yourself like I'm going to teach you, or if you hire somebody like me for done for you bookkeeping services, you have to have bookkeeping. If you already have a small business, I want you to reach out to me and let me know what kind of business you have. I would love to follow you on social media.
00:01:03
I am trying to build entrepreneurial community with other business owners just like myself and especially my podcast listeners. I want to know who you are, what kind of business you have, and I want us to connect over on social media. So go follow me. Visit the links in the show notes to follow me on your favorite platform and send me a DM. Reach out to me, hop in the comments and let me know that you are listening to Money Through Ease every week.
00:01:31
So let's get into what you need to be doing on a monthly basis. I thought one of the episodes for the end of December would be a great time to share with you the three step process for my bookkeeping system so that starting January 1, you can do it yourself and you can stay on top of your bookkeeping for all of 2024. If you are not already subscribed to this podcast on your favorite podcast platform, go ahead and hit the subscribe button or follow and leave me a five star review if you loved it. Leave me a one star review if you hated it and let me know why. All right, let's dive right in.
00:02:09
We've got three simple steps that you need to take to do your bookkeeping every single month. This is going to vary on the how from business to business and from industry to industry. But overall, these are the steps that every business needs to take or pay somebody else to do in order to have their bookkeeping done every month. Step number one is categorizing your transactions. Now, if you want to work with me one on one and learn this process in your bookkeeping, with immediate feedback from me and one on one support, you can head to the links in the show notes and get on a training on QuickBooks Online with me, if you're using QuickBooks Online.
00:02:52
But the first step that every business needs to take is categorizing those transactions. What's involved with that? Well, number one, you need to keep your receipts. In the United States. The IRS tells us that we need to have records that substantiate both the income that we made, the revenue what people paid us in our business for our products and services, and we also need to have receipts or records of what we spent money on, especially if we are claiming those expenses as business deductions on our tax return.
00:03:25
So having a system for your business receipts and your business paperwork is vitally important to step one, right? We cannot sit down and categorize our transactions that happen on our bank statement and on our credit card statements unless we have the backup documentation that would be the receipts and invoices things like that. So having a system to keep all that paperwork together is, of course, crucial. And I have a free resource guide for you that will help you keep those receipts in a place where you know where to look when you need to find them in order to categorize your transactions. That guide is called Chaos to Calm, and it's completely free for you to download.
00:04:07
Just visit the link in the show notes to grab your copy. Now, once we have your receipts in one place every single month, you need to be going in and categorizing those transactions. That includes the money that you make from selling a product or selling your service. Whatever your offer is, you need to have a way to categorize that income that is revenue to your business. So, for instance, I've given this example a couple of times, but for my business, I have accounting services, which is where I'm doing the actual accounting for my clients and payroll.
00:04:42
And then I have consulting services, which is where people hire me to basically consult and teach them how to do their bookkeeping or develop best practices for their financial organization. So if you have revenue coming in, you've got income for your business, you need to have categories for that income that make sense to you. This might also be based on how you spend money in order to make a revenue. Do you have certain marketing that you do? Do you have cost of goods where you actually have to buy raw materials in order to create the product that you sell?
00:05:20
You need to categorize your income based on what makes sense for your business, just like I do with my business. You also need to categorize your expenses. And this is where your receipts and financial records that we learned how to categorize and sort through in Chaos Calm, my Free Receipt Organization Guide. That's where that information comes in handy, because when we keep our receipts, it's super easy to go through our bank statement and our credit card statements look at each transaction and figure out how to categorize those expenses. What did we spend money on for our business?
00:05:55
What was the purpose of spending that money? What kind of return on investment did we get from that expense? You're going to go through your bank statements and any credit cards that you use exclusively for business every single month, and categorize each transaction based on that information. So that's the first step to bookkeeping. You can download an Excel file from your bank every month.
00:06:21
Most banks allow you to do that. That has all of your transactions listed, including the date of the transaction, the bank memo showing you probably the vendor name, and then it also shows you whether or not it was a debit or a credit, whether money left or entered your account, and how much. So you need to categorize each of those transactions on those statements. You can also do this in QuickBooks Online. Like I mentioned before, I can show you the step by step process.
00:06:48
If you're using QuickBooks Online, just get on a training on QuickBooks Online with me. Visit the link in the show notes in order to book that training. The second step, and the most crucial step, and the step that a lot of people skip over, is reconciling those accounts. So the same accounts that we did data entry for our bank statements, our credit card statements, we use those statements to reconcile the account each month. This means going line by line in our transactions, looking at our starting account balances and the ending account balances, and making sure everything is accounted for and adds up.
00:07:28
So we don't want there to be any discrepancies between our bookkeeping and the bank statements or the credit card statements. If there's a discrepancy, that could mean a lot of things. It could be a mistake that was made. It could be a transaction that got messed up or something that was missed completely. But until we reconcile our accounts, we cannot know that our books are accurate as far as the numbers go, the amounts of debits, the amounts of credits, the bank account balance at the end of the month, we can't know that any of the information is accurate until we reconcile.
00:08:03
Reconciliation also allows us to catch things like fraud. Not all the time, but if something's gone wrong, usually in my clients bookkeeping, I catch it on the reconciliation, and then we can handle it. We can either call the bank or figure out what happened and do some problem solving from there. But reconciling is extremely important, and if you want to learn how to reconcile your statements, you can sign up to be a beta tester for my digital bookkeeping course, Mind the Gap. Beta testing is now available to folks who are registered for my year end virtual party fuck off 2023 or who have already been my client and invested in one of my offers mind the gap is going to teach you not only how to reconcile, but how to categorize your transactions too.
00:08:55
So you can either sign up for Mind the Gap or you can sign up for a one on one training on QuickBooks Online. With me, reconciliation is a little bit more involved than I can go through on a podcast episode. But like I said, I do have resources available to you if you want to learn how to do that yourself. And then the third and final step for monthly Bookkeeping is to look at your reports. Which reports do we need to look at?
00:09:22
That would be your profit and loss statement, your balance sheet, and your statement of cash flows. If you're using an accounting software, it should have these reports already memorized, already automated for you. And if you're using an accounting software that does not have these reports built into it, if you have to customize anything, you're wasting money on that accounting software. If you're not spending any money on accounting software and it can't pull these reports for you, then you're getting your money's worth. Your accounting software should allow you to reconcile and also run these financial reports every single month.
00:10:00
It's super important to be able to look at our reports, see what's going on in our business, measure where we're at with our financial goals, and to budget and to plan for things. So we're coming up on a new year. 2024 is going to be amazing, I hope for you and for me. But I'm doing some planning right now and that means looking at my financial reports, actually pulling my profit and loss statement, my balance sheet, my statement of cash flows, and projecting what's going to be happening in 2024. From there, I'm able to set goals for my business.
00:10:34
If I know what my baseline numbers are from looking at my reports, then I can set goals and actually move towards achieving them. So that's my three step process for Bookkeeping. Y'all, it's really simple, it varies from business to business, exactly the steps that people take, that I take for each of my clients. But overall, that's it. That's all we need to be doing every single month.
00:11:01
It doesn't sound as scary whenever it's broken down into a three step process. Right now I know some folks out there maybe have some sort of neurodivergence, maybe have problem with executive functioning and I completely understand that. It's hard to sit here and listen to somebody say it's just a three step process, knowing that it's a lot for you to overcome, even sitting down and getting started on that process. And in that case, I want you to take the first step, which is to download the free PDF guide Chaos Calm. You'll find that link in the show notes and that's it.
00:11:37
You've taken the first step towards financial organization, and that is the first step of Bookkeeping is making sure that our receipts are organized right? So that we can categorize our transactions, get the ball rolling, get some momentum in your business financial organization and download Chaos Calm now. I can't wait to hear what you think of it. Once you receive your copy, once you've gone through the guide, I would love to hear what you think. I would love to hear your feedback on it.
00:12:04
Let me know if it changed the way you think about organizing your receipts and finances for your business. You can reply to any email that you get from me and I will see it. It goes directly to my inbox. Nobody else looks at my inbox. So your information is confidential.
00:12:18
That's it, y'all. I hope you have an amazing rest of your week. Don't forget, sign up for beta testing before the end of the year. It will not be available at that much of a discount. Over 60% off ever again.
00:12:31
That's my Entrepreneurial Bookkeeping course, Mind the Gap, where I'm going to teach you each step of this bookkeeping process and then more. It's going to have video content, audio lessons, downloadable guides, spreadsheets. You're going to be able to plug in your numbers and play around with your own data and develop systems based on the successful way that I do bookkeeping for my business and all of my clients. Thanks for listening. Hope you have a great rest of your week.
00:13:00
I can't wait to see you in mind the gap or on fuck off. 2023.