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What are Good Bookkeeping Practices?

By October 28, 2014February 26th, 2019No Comments

Know what will help keep your business running like a beautiful machine? Good bookkeeping practices. Completed regularly, these habits will give you not only confidence, but peace of mind. Neglect these practices and mistakes will fester, leaving you up the proverbial creek with lots of back work to do. Bottom line: Good bookkeeping practices performed consistently will keep your business running at its very best and allow you to discover and fix problems before they derail you.

The best way to understand good bookkeeping practices is to group them into daily, weekly, monthly, and quarterly tasks. Daily tasks become habits as you repeat them often. They make up the basic duties of your day-to-day workflow. But it’s easy to get bogged down in the details, right? And you’ve got a business to run! That’s why less frequent tasks are your opportunity to step back and look at the big picture. They keep you fully informed about your business performance. Add these weekly, monthly and quarterly tasks to your calendar so that you will remember to include them as part of your business roadmap.

(Note: Reports referenced in the following task descriptions can be found here.)

Daily task

  1. Enter every business transaction into your general ledger to create a permanent financial history of your business. The general ledger proves the accuracy of all transactions and exposes discrepancies such as double billings or payments. It provides an internal and external audit trail that will come in handy if you are called upon to explain your company’s finances.
  2. Invoice your customers or clients as soon as the sale or service is completed to avoid delays.
  3. Make cash deposits every day. Record both your cash and electronic payments in the proper journal section at the end of each day.
  4. Run a daily cash flow report to stay informed on day-to-day operations. Make any needed adjustments.
  5. Back up your financial files using a primary and redundant back-up source.

Weekly Tasks

  1. Run a weekly cash flow report and check that your data entries and filing are complete and up-to-date.
  2. Run your accounts payable and accounts receivable reports and make sure that all bills are paid on time to protect your credit rating.
  3. Check for any overdue accounts receivable and send a reminder to the client or customer if necessary.

Monthly Tasks

  1. Meet with your bookkeeper and/or accountant for your monthly financial review.
  2. Run a reconciliation report called a trial balance to ensure that all of your debits and credits are in balance. Check that all entries have been posted to the correct subledgers, and that there are no errors.
  3. Send out monthly statements to your clients or customers. Add “reminder statements” for those that are overdue.
  4. Refine your collection policies to coordinate with your aged Accounts Receivable reports.

Quarterly Tasks

  1. Work with your tax advisor to prepare and file your quarterly taxes, as required by your jurisdiction. File all reports on time for sales taxes, employee payroll taxes, GST (Canada) or FICA (USA), etc. Timely filing will avoid late penalties. Review the cost of benefits such as health insurance, bonuses, or retirement plans for yourself and your employees. Consult with your tax advisor on how changing regulations will affect you and your business.
  2. Meet with your accountant for a quarterly reflection. This is your opportunity to step back and examine the big picture. Run the reports produced with your business accounting software and then ask some tough questions. What are the numbers on my balance sheet showing me about the overall business performance? Are my cost projections in line with my gross profit goals? What trends are emerging? Is my revenue rising or falling? Are cost of sales or expenses escalating? Do I need to trim expenses or delay major purchases or acquisitions? Are my business goals supporting my personal goals, such as my retirement, my children’s education, my quality of life? Have I added or lost employees, introduced new products, won or lost any accounts? What is my competition doing? How’s the state of the economy? Do I need to modify my financial plan to reflect these new realities?
  3. If your company has inventory and equipment, complete an inventory of all relevant items.
  4. Ensure that whatever system you are using your data is backed up and secure.

Continuous monitoring and refining of your business roadmap shows lenders and investors that you are responsible. You will be able to adjust quickly to changes in your personal and professional life. Your year-end financial responsibilities will be exponentially easier if your daily, weekly, monthly and quarterly bookkeeping tasks become true habit. Proactive measures will reward you with time and money saved—and that’s great—but the real value of good bookkeeping habits lies in the peace of mind you gain from knowing that your business is on track and taking you exactly where you want to go.

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