085 Back to Basics: Essential Bookkeeping Tips for Business Owners
linktree.com/AllEaseAccounting
Regan Bashara, the Numbers Witch and Advanced Certified QuickBooks Online ProAdvisor, breaks down the fundamental steps of bookkeeping. From data entry and reconciliation to understanding financial reports, Regan provides actionable advice for small business owners to keep their finances in order. Sponsored by the Bookkeeping Foundation Kit, this episode ensures you have the tools and knowledge to maintain accurate and efficient bookkeeping practices.
_________________________________
Sponsored by: The Bookkeeping Foundation Kit – Your essentials for setting up and managing your bookkeeping effectively. Click here to grab the Kit for $77.
Access the Mind the Gap Community here.
Download my free receipt organization guide here:
Book a consultation with me to learn which of my offers is right for you 👇🏻
00:00:00
Welcome to money. Through ease. This is Regan Bashara. I'm your host. I'm also the founder of all these accounting. I'm an advanced certified QuickBooks Online Proadvisor. And I'm your numbers, which and your QuickBooks bitch. And today I want to talk to you about bookkeeping basics. We've been doing a lot of episodes that are, like basics, this basics.
00:00:20
That and there is a reason for that. I get a lot of folks that come to me need the basics that need just like the cut and dry, very foundation of bookkeeping and accounting and small business finance.
00:00:25
The.
00:00:34
And a lot of the business owners I work with are not in a super complicated financial situation when it comes to their business. Bookkeeping like it is very simple. The kinds of businesses that most people run and that's for that's a good thing, right? That's for good reason. Like you don't want to over complicate it right out of the gate if you're brand new to business.
00:00:53
Keep it simple.
00:00:54
So we're going to keep it simple here on the podcast and justice. Talk about bookkeeping basics today. So how do we know that we're actually doing bookkeeping? What is bookkeeping? What is not bookkeeping? And here's what I often hear from my clients.
00:01:10
I don't know where to start.
00:01:11
I don't know if I'm doing things right. My reports don't look correct. I can't keep up with my invoicing and get paid on time.
00:01:20
So today we're going to talk about what is and isn't considered part of the bookkeeping process this episode. I want you to know is sponsored by the Bookkeeping Foundation kit, and this is an essential tool kit of videos, questions, samples, and resources to help you set up a bookkeeping system and stay on top of it for your small business. The bookkeeping.
00:01:40
Foundation kit is $77 and you can purchase it by clicking the link in the description. You can also view the curriculum before you buy at bookkeepingfoundationkit.com.
00:01:51
Learn how to set up your books the right way, especially if you are using QuickBooks Online and I teach you the skills to do your books correctly on time and consistently never again procrastinate on your taxes because your bookkeeping will be done and ready for tax filing season every year. As a bonus, I'm also offering 30 days free.
00:02:10
Inside my private virtual community. That way you can have support from me and my other clients as you work through the material. I have hours of live content and tutorials already in the group and I go live twice a month for more Q&A and financial organization tips.
00:02:28
I also host Co working sessions on zoom that are exclusively available to members of the community. These are kind of like a study hall, and you can come work silently alongside me on or off camera, or even bring questions and get support from me on the call. Now let's get into today's topic. So these are the three steps to doing your bookkeeping.
00:02:50
If you're doing all.
00:02:51
Of these steps, great. Then you're doing your book.
00:02:55
If you're missing one of these steps, I'm sorry to be the one to tell you, but you're not doing your bookkeeping unless you're meeting these requirements. The first step to doing bookkeeping is data entry. Now we have talked about how data just exists, it just is. Why? Because you're making and spending money.
00:03:15
People are paying you money for your products or services and you're spending money because we're all in business to make money and that requires spending some money upfront. We all have expenses that we get to claim on our taxes as business owners. So you're making money and you're spending money.
00:03:32
And that creates data that creates a record of that transaction and the first step to doing bookkeeping is putting that data into your financial record keeping system. So some examples of data entry are downloading your bank transactions into QuickBooks Online. We have a nifty way to automatically.
00:03:52
Import transactions and I still come across business owners that are doing this manually that are inputting transactions line by line manually. Don't do that anymore. We're going to talk about some automation in this episode too.
00:04:07
But data entry a lot of that can be automated and I for one want you to save yourself time and get to the work that you actually care about, get to the work that's actually fun for you and for most people, data entry is not the fun part of running a business. Now I'm a bookkeeper, so it is fun for me, but data.
00:04:27
Entry does involve taking your bank transactions and putting them into whatever accounting software that you're using. Whatever your record keeping system looks like for me and my clients, it's QuickBooks Online. Another example of a type of data entry would be invoicing your client.
00:04:45
That is creating a record that you asked somebody to pay you money. An invoice is an ask. It's an ask to the other person to say, do you want this thing? Give me some money for it. Or hey, I already gave you something. I provided a service for you. Now please pay me for it. If you invoice after the.
00:05:04
Fact.
00:05:05
So invoicing your clients creates a record.
00:05:08
And then when they pay you and how also creates a record that you need to record, you need to record when and how somebody pays you. And that is data entry. You are also uploading receipts, hopefully to your accounting software and putting receipts in uploading receipts is a part of data entry.
00:05:28
That's creating that financial record, right and then accepting and matching transactions in the bank feed, which I do have a YouTube video on. My best tips for automating data entry, especially with the bank transaction.
00:05:41
Feed and I want you to go subscribe to my YouTube channel right now. Pause this episode. Pause the podcast. Make sure you rate and leave the review for the podcast as well. But go follow me and subscribe to my YouTube channel because I'm putting out videos every other week. That is my new content schedule, but I do have several videos.
00:06:02
That you can look up in the past with my top best tips and practices for data entry, especially if you're using QuickBooks Online and I show you how to automate that. What to watch out for because there are some things that you need to make sure you do correct.
00:06:18
Otherwise your data.
00:06:19
Will be wrong.
00:06:20
So accepting and matching transactions in the bank feed is one way that we do data entry and then running payroll is a form of data entry. But I don't think a lot of people think of it like that. But whenever you run payroll for your employees, you're creating a record you're creating.
00:06:38
Transactions you run payroll, you put in their hours, it calculates their paycheck.
00:06:42
So the paychecks are transactions, that is data, but it also creates payroll tax liabilities because as the business owner, when you have people on payroll, you pay employees you withhold taxes from their pay. And that creates a liability for your business that you need to pay to the government.
00:07:01
So running payroll is a form of data entry and again these are just some of the examples that I have for data entry. But it is simply the first step to doing bookkeeping. What data do we have? Is it already in our financial record keeping bookkeeping system?
00:07:18
Well then put it in there. Do the data entry, get it into your system, whatever that system is so that we can do something with it so that we can make use of your data. And then the second step to doing your bookkeeping, the most important one in my opinion, is reconciling. And we know that reconciling is how we check our work.
00:07:39
Just like when you were in algebra class, you know in middle school probably I think.
00:07:45
I have a math degree. It's been a long time since I.
00:07:47
Just did algebra.
00:07:49
But in middle school, I think people were doing algebra or pre-algebra, maybe in high school. Maybe some folks took algebra in college and algebra is all about like solving for X, right? You're given an equation and then we have an unknown or a variable.
00:08:05
But usually.
00:08:07
Labeled as X and you solve the equation to find the value for X. How do you check your work for algebra, you take the value or the answer that you got for X and you plug it back into the original question into the original problem, because if you solved for X, that answer is right.
00:08:27
And you know that it's.
00:08:28
Right by plugging it back in and making sure that that equation balances, this is exactly what reconciling is. We are checking our work. We're checking our math. We're making sure that the numbers are right and there's only one way to do that and that's to reconcile it has to be done in order to know that your numbers are accurate and reconciling.
00:08:48
Has to be done in order for you to say that you did your bookkeeping. If you're not reconciling, I am sorry to say that you are not doing bookkeeping. You have to reconcile your bank accounts when you go get your taxes done every year. If you hire a CPA or another.
00:09:04
Accountant to do your tax return for you, especially if you're a small business owner, they should be asking you whether or not your bookkeeping has been reconciled. That should be a question that they ask you, and I have. Clients come to me.
00:09:18
Who have not reconciled their bank accounts, but their tax, their tax preparer, are already filed their tax return.
00:09:25
And I'm like, well, this is wrong and this is wrong, so I don't know why somebody filed your taxes whenever you hadn't reconciled like that is part of the bookkeeping process.
00:09:34
So again, I have the bookkeeping foundation kit, which does include a section on reconciling. There's an entire section about that because it's something that you need to be doing. And I know that reconciling is the area that a lot of people get stuck on because they have trouble troubleshooting.
00:09:54
But they can't figure out what's going wrong. They don't know where to look to see why their accounts are not in bank.
00:10:01
So in the bookkeeping foundation Kit I have taken you through the troubleshooting steps that I do when my clients bookkeeping will not reconcile and I walk you through, there's five different troubleshooting tips that I give you, and I show you exactly where to go, what to look for, and I guarantee you you will be able to reconcile your account.
00:10:21
And if you're importing your transactions from the bank directly, your account should.
00:10:29
Without too many problems, every month, all of this is kind of linked together to help support you do your bookkeeping consistently and correctly. And finally, the last step, and you do need to be doing this, is looking at your financial reports. You know, if you've been listening to the podcast for a while.
00:10:48
That the three reports I want you to be looking at are your profit and loss statement, also known as your income.
00:10:56
Treatment your balance sheet and your statement of cash flows and if you are using an accounting software, it should already have these reports built into it. And if it doesn't, you're wasting money on whatever you're paying for that accounting software. Those are the three reports you need to look at on a regular basis now.
00:11:16
Profit and loss report look at every month. Look over those numbers and ask yourself if those numbers look correct. We're going to go over that in a second.
00:11:25
But I think you can get away with looking at your balance sheet and statement of cash flows, maybe every other month, maybe every quarter. In fact, I don't recommend looking at your statement of cash flows every single month even though I do send that to my clients every month.
00:11:42
I don't necessarily need them to pay attention to whether or not they're burning through cash in a particular month versus an.
00:11:50
We look at the statement of cash flows usually on a quarterly basis in the middle of the year or at the end of the year to kind of see whether we burn through cash this year or if we had a surplus of cash. If we retained some cash in the business. But looking at your reports is a very important part of bookkeeping.
00:12:10
Because that's the whole point of doing bookkeeping. It is to have that data at your fingertips in a form.
00:12:17
At on those reports that you can read and understand and use to make decisions, if you wanted to hire somebody, if you want to expand your business and hire a workforce or bring more people on the statement of cash flows will indicate to you whether you have cash surplus in the business enough to cover that person's payroll.
00:12:38
You can also look at your balance sheet to see what kind of loans do I have in my business, what kind of liabilities, what things do I still owe? What is my net worth of my?
00:12:48
Business if I needed to sell my business tomorrow, would I have a positive net worth? Would someone want to pay me for this business or would I have to pay off a bunch of debt and end up with a net zero at the end of the day your reports contain this really valuable information and not enough people are looking at their reports and getting what they need to out of that information.
00:13:09
Next time somebody talked about it to.
00:13:11
Be honest so.
00:13:11
That's why I'm here talking to you on the podcast.
00:13:14
So if you're stuck on how to deal with your business finances, I want you to always think about that first step, which is data entry. That's the first step of bookkeeping. So if you're stuck and you're like, I don't even know where to start when it comes to my bookkeeping, and I'm worried I'm not going.
00:13:31
To do it right, I'm worried I'm going to **** it up.
00:13:33
Let me just tell you what I tell most of my clients.
00:13:36
Is that you can't **** ** your bookkeeping so much that we can't fix it. I've never met a set of books that I couldn't fix that I couldn't make it work. Make it right and accurate. If that's the case, we start with data entry. Anytime we feel stuck, go back to the first step of bookkeeping.
00:13:56
Which is data entry and here are some questions that you can ask yourself.
00:14:01
To get unstuck.
00:14:03
Where does my data live? As in which accounts do I transact in for my business? Am I swiping my business, checking account, debit card, debit credit card for my business? Do I sometimes swipe my personal card on accident or that's because where money is and I have business expenses?
00:14:23
That live in my personal account. Where does my data live start there. The next question you ask yourself is what time period am I working with?
00:14:33
If you've never done bookkeeping for your business.
00:14:36
We're going to start with day one, day zero. In fact, I always tell you all that you need to have a bookkeeping system in place before you make your first dollar. The magic number is 0. We start at 00 dollars of revenue. In order to do our bookkeeping. So what time period do you need to work?
00:14:54
With.
00:14:54
To do your.
00:14:55
Books.
00:14:56
Are they caught up? And so you just need to do this month's bookkeeping. Have you never done bookkeeping or you need to go back a couple of years because you're late on your taxes, which is a thing that happens.
00:15:07
Do you need to start with the very first day you opened, or are you considering a startup and you want to start a business? Then we're working with the time period that's in the future and it's great to have a bookkeeping system and a record keeping system before you start taking money from people, and then how will you report this?
00:15:27
Income or these expenses on your tax return because that is where the bookkeeping is going to go. That's what we're going to use it for, is to file your tax return next.
00:15:36
Dear, so think about how you report income on your taxes. What kind of expenses are you going to be claiming for your business on your taxes? So once you can answer these questions, you'll have a head start for a big bookkeeping or accounting project. And I recommend working in chronological order.
00:15:57
Meaning that we start with the oldest bank statement and work our way forward and.
00:16:02
Time. So if you have to do 2023 bookkeeping, you start with January 2023 bank statement. If you're starting with the first day you opened your business, you start with the first day you open your business and you move forward statement by statement. Inside the bookkeeping foundation kit, I walk you through this.
00:16:22
Step by step process, including determining where to start. So no matter if you are a seasoned business owner with messy bookkeeping or you're a startup business and you're looking to create a functional bookkeeping system, are you stuck on whether or not you're doing things right? Here's how you check.
00:16:42
Reconcile your statements if you're worried that your numbers aren't right, have you reconciled? If you haven't, get to it, get cracking and then look at your profit and loss or your P&L and question the numbers there. Do they look right? Do my numbers make sense?
00:16:58
Is something on this report that I didn't?
00:17:00
Expect to see.
00:17:02
Was there something on the report that I did expect to see, but I don't see it.
00:17:07
Ask yourself these questions about your numbers. Really dig into the data and I give you my best troubleshooting tips for reconciling in your bookkeeping foundation kit. I walk you through exactly what I do when my clients books won't reconcile.
00:17:22
And if you can't keep up with your invoices and you have trouble getting paid on time, then I recommend that you take a look at your automations and templates. So if you know anything about like brain chemistry and stuff.
00:17:37
Our brain uses thinking shortcuts called heuristics, and we use these every day so that we only have to process the new information that we receive. I don't need to think about how to sit down in a chair, I just do it right. I don't have to think about what the purpose of my desk is, I just put things on it.
00:17:58
And those are heuristics. We just like shortcut around things.
00:18:03
Based on information that we received and processed previously. So just like our brain uses those shortcuts every day to save time on processing and to save energy and brain power, our bookkeeping needs templates. It needs automation so that we can spend time on the ship that actually matters in our business.
00:18:24
And not waste a bunch of time creating invoices in Microsoft Word every day. With all of that being.
00:18:28
Said.
00:18:29
I hope you.
00:18:30
Have a better understanding of what bookkeeping is and how to know that you're actually doing it. How are you checking off these boxes for yourself to know that you're doing your bookkeeping and that you're doing it correctly? So I hope this is helpful, and if you want more information about the simple method that I use.
00:18:50
For bookkeeping for my clients and how?
00:18:52
I teach people.
00:18:54
To do their own bookkeeping, go grab the bookkeeping foundation kit. You can go to bookkeepingfoundationkit.com or just visit the link in the show notes. Make sure you leave this podcast a rating or review and share it with the small business owner who really struggles with their finances. Because I would love to help them out. I have a lot of resources, free things, and paid things.
00:19:14
So that you can get your bookkeeping done on time consistently, and make sure that it's correct. Thanks so much for listening to money. Through ease. I gotta go feed my pets now. Bye, y'all. Have a great week.