Good Bookeeping Practices

Strong bookkeeping processes and procedures are essential to any business, without them owners will not have the basis of data necessary to run, manage, and grow their business. In that light it is equally important to have a qualified bookkeeper or accountant with a solid understanding of accounting principles, financial statements, and business operations. Additional experience, qualifications, certifications are helpful but they come at a price so weigh them to the value of the expected outcomes. As a business owner determine what information you need and how strategic you consider your accounting function to be for managing and understanding your business. In my opinion accounting is of critical importance to managing a business. In small and start-up situations it can often be a wise decision to outsource such non-value added activities. Ask yourself how valuable your time is (what is your hourly bill rate for example) as the answer should empower you to make decisions for resource allocation. I tell clients to focus on what they do best and outsource other activities.
Backing up data, keeping good records, and filing are important tasks and each business should determine how often such tasks should take place. Ask yourself how much time you would want to spend re-entering data, calling vendors and creditors, and generally putting out “fires”. Many businesses do not have the time or resources to quickly re-tool if data is lost or systems are down so ensure you are prepared to handle such situations. For your bookkeeping system I strongly recommend offsite backup of data on a regular basis.
Another important resource is a qualified and experienced tax preparer. They are critically important to ensuring tax returns are prepared correctly; this would include payroll, income, and sales tax. Missing a deadline, filing incomplete data, or just not reporting correct information can be costly, both in terms of fees and charges and potential impact on client relationships should news leak. In addition, they are an extremely valuable tool in many tasks and activities that a business faces. As such, make sure to interface with them and establish parameters for the relationship. Keep track of your communication with them. They can help you grow your business and network with other professionals. They will also keep you out of trouble with the tax authorities, just make sure you do your research and get referrals.
What follows is a list of suggested activities for a good bookkeeping system
1. Print checks – establish set dates from issuing checks.
2. Direct deposit and email paystubs – to save time and money. Many employees appreciate getting their payment this way as it avoids the time of going to the bank. In addition, this is a secure way to make payments.
3. Print deposit summaries to attach to bank receipts – ensures good recordkeeping.
4. Get online access to bank accounts and credit card statements. This doesn’t mean you have to stop paper statements, but it will speed up many activities and it empowers you with better real time data on balances.
5. Pay all payroll taxes online. In some cases this may not be required; however it saves time and money. In additional, you will have a way to track activities.
6. Use bill pay through bank account – save time & money. This also provides you a valuable tool for managing your cash needs.
7. Email invoices/statements to customers – save time & money. A printed version can be filed for future reference or if a sales tax audit were to result and detail records were needed.
8. Always obtain a W-9 before allowing a subcontractor to perform work. This is good business practice and can help you avoid costly problems in the future.
9. Obtain a copy of general liability coverage when applicable. In businesses where such coverage is important this will protect you from potential liability.
10. Make up/post a schedule of tax deadlines for all taxes and forms. If you outsource this activity make sure to establish expectations with your vendor.
11. Organize pending files for payables and receivables by name
12. Organize paid invoices/check stubs and file by customer name
13. Organize paid bills/check stubs and file by vendor name. This provides a quick and easy way to access information should a dispute arise. Many companies manage expenses by type (office supplies, etc.) verses vendor. Most accounting programs provide multiple ways of reporting and managing expenses.
14. Organize personnel files by employee name for ease of access
15. Create payroll tax files for each type of tax: 941, State withholding, 940, SUI
16. Use Smead Viewable tabs for your files. This will give you the easiest view of files and allow for quick access.
17. File with newest transaction in front. This gives you the quickest access to the most relevant data.
18. Box up/store each year’s files after tax returns have been filed. Clear mark boxes and store them in a dry location.

The above are suggestions and may not be exhaustive, but they should give you the basis for establishing and maintaining a solid bookkeeping system.