As a small business owner, staying on top of your finances is crucial for making informed decisions and ensuring the success of your enterprise. However, we understand that life can get hectic, and sometimes bookkeeping tasks can fall by the wayside. Whether you’ve been preoccupied with day-to-day operations or simply haven’t had the time to dedicate to your financial records, this checklist is here to help you streamline the catch-up process. By following the steps outlined in this article, you’ll be able to efficiently tackle your overdue bookkeeping tasks and regain control of your financial health. Let’s dive in and get your books in order!
The Checklist
Navigating life as a small-business owner can be challenging, at the very least. Leveraging the following checklist will give you every opportunity to run your business with financial awareness and confidence. Please feel free to leverage this digital copy of the checklist by selecting “File” and then selecting “Make a Copy”. Now you have your own digital catch-up bookkeeping checklist! You can also find a printable version of the checklist here.
Gather Financial Documents
The goal is to identify all financial transactions that affect your business. The only way to get a clear picture of your business’s health is to include everything, so don’t leave anything out.
- Invoices
- Receipts
- Bank statements
- Credit card statements
- Business loan statements
- Payroll data
- Federal and state taxes paid
- Any other relevant financial documents
Categorize Transactions
Subscribe to an accounting software and take some classes to learn how to use it properly. There are several good cloud-based accounting software options available, such as QuickBooks or Wave. It’s also a good idea to find a bookkeeper to give you a few lessons on how to use the software.
- Sort bank transactions by date
- Identify the main categories that represent your business’s transactions (e.g., income, expenses, equity, assets, liabilities)
- Assign categories for cost of goods/services for tax purposes
- Input into your accounting software
- Verify the accuracy of transaction details
Record Income and Expenses
Separate your income into the different income streams you offer your customers. Be sure to include all the income you received since the beginning of the year. If you invoice your customers, you have the option of recording those invoices in the accounting system. Expenses should be separated into their appropriate account categories (this makes a difference at tax season).
- Enter sales and revenue
- Record expenses and purchases
- Allocate transactions to appropriate categories
- Ensure all income and expenses are accounted for
- Ensure consistency in categorizing similar transactions
- Separate personal expenses from business expenses
- Make sure you’re accurately recording your car lease in QuickBooks
Reconcile Bank and Credit Card Statements
Reconciling bank accounts is one of the most important steps to ensuring your books are accurate, and many people don’t do this (I’ve even seen many bookkeepers skip this step).
- Gather your bank and credit card statements
- Compare transactions with bank and credit card statements
- Identify discrepancies and resolve them
- Update bookkeeping software with corrected information
Review Accounts Receivable and Payable
Do your customers owe you money? Do you owe your vendors a payment? This is critical information to keep track of for obvious reasons. It’s also important to possibly offset your taxable income.
- Follow up on outstanding customer invoices
- Record payments received
- Take care of your vendors
- Update accounts receivable and payable balances
Perform Reconciliation for all Business Loans
Interest paid on loan payments are tax deductible, yet many businesses don’t report this information to their accountant. Reconciling your loan accounts and reporting the yearly interest amount is key to calculating your tax liability.
- Reconcile loan balances with bookkeeping records
- Investigate and rectify any discrepancies
Generate Financial Reports
Once all the work is done, you can now generate financial reports. A good accounting system will allow you to generate many different reports to give a clear picture of your financial health. You can use these reports to make important decisions about growth and sustainability for your business.
The most popular reports are:
- Profit and loss statement
- Balance sheet
- Account receivable aging summary
Evaluate Tax Obligations
A business that provides its tax accountant with clean bookkeeping records will end up with a more accurate tax return for less money. Keeping good records will also help you stay on top of important tax deadlines, which results in fewer tax penalties.
- Review tax deadlines and tax regulations
- Prepare necessary tax documents to calculate estimated tax payments, if applicable
Implement Systems for Ongoing Bookkeeping
A smart business owner updates the books on a daily or weekly basis. It’s easy to fall behind, especially if you are busy running your business and doing your own bookkeeping. However, updating and analyzing your business finances weekly is so important for the continued success of your business that it has to be done.
Think of it this way; you won’t have a business to keep you busy if you don’t take care of your books. If you don’t have the time or understanding to keep your books accurate, consider hiring a professional. The investment in your success will be worth it.
- Set up a regular bookkeeping schedule
- Utilize accounting software or tools
- Consider outsourcing bookkeeping tasks if needed
Archive and Back Up Financial Records
Once you have an electronic recordkeeping system in place, you should continue keeping your paper documents in a safe place. In the event of an audit (tax, insurance, W/C), you may need the information that isn’t stored with your financial records. Most banks only keep digital records for 18 months without jumping through hoops to get them. It’s a good idea to keep a paper backup of all your bank statements, canceled checks, credit card statements, and loan statements on file for the unexpected.
- Store documents securely
- Implement backup systems for digital records
What is a Bookkeeping Checklist?
A bookkeeping checklist is a strategic document that outlines essential tasks and procedures to be followed in managing financial records accurately and efficiently. It typically includes items such as reconciling bank statements, updating accounts payable and receivable, categorizing expenses, and ensuring compliance with relevant regulations. By systematically following a bookkeeping checklist, businesses can maintain organized financial records, mitigate errors, and make informed decisions based on reliable data.
What is Clean-up Accounting?
Clean-up accounting refers to the process involved for a business that hasn’t followed consistent practices to maintain its financial records. This is usually evident in January, when records are needed but don’t exist for income tax purposes. Accurate reporting for the entire year is necessary for tax filing, and it’s usually an emergency situation that needs to be done quickly. The business owner then has to identify and locate all documents needed to recreate all the transactions the business conducted for the last 12 months. It’s not easy, and many times, important expenses incurred months ago are forgotten and not accounted for.
What Happens If You Don’t Do Bookkeeping?
A business may be able to get by for a few years without keeping track of its books, but it will catch up to you. You won’t know if you’re overpaying for products or services. You won’t know if you are applying the appropriate markup to your customers. These are the biggest reasons businesses don’t survive over time.
How Much Time Do Small Business Owners Spend on Accounting?
A small single-owner business with less than 3 bank accounts should expect to spend between 8-10 hours a month maintaining their financial records. A mid-size business with 3-6 bank accounts should expect to spend between 12-15 hours a month. Larger companies will need to devote a minimum of 20 hours a month. This is in addition to interacting with their customers, creating invoices, and paying bills.
How Often Should a Small Business Do Bookkeeping?
A small business should “do bookkeeping” as often as possible. At a minimum, weekly cleanups are necessary to identify any problems with the transactional reporting. Monthly account receivable reports are necessary to determine who owes your business money.
If your books are set up properly, a monthly review will be vital to develop growth strategies for your industry.
Next Time Doesn’t Need to be as Tough
Catching up with your bookkeeping can be a daunting task, but by following this checklist, you’ve taken a significant step towards financial organization and clarity. To make this process less stressful in the future, consider implementing regular bookkeeping practices throughout the year. Set aside dedicated time each week or month to update your financial records, reconcile accounts, and review transactions. Utilize accounting software or tools that streamline the process and automate repetitive tasks.
Additionally, consider seeking counsel from a QuickBooks-certified bookkeeper or accountant to ensure accuracy and compliance with financial regulations. By staying proactive and maintaining consistent bookkeeping practices, you’ll not only save time and reduce stress during catch-up sessions but also gain valuable insights into your business’s financial health and performance. Remember, financial organization is key to making informed decisions and achieving long-term success.
