What are Good Bookkeeping Practices?

What are Good Bookkeeping Practices?

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Even if you just started your business today, it is never too early to start implementing good bookkeeping practices.

Staying on top of your bookkeeping keeps your business running like a well-oiled machine. These habits will not only give you confidence but peace of mind. In turn, neglecting these will cause a backlog and will then lead to mistakes.

The bottom line is, good bookkeeping practices performed consistently will keep your business running smoothly and allow you to identify and fix problems before they derail you.

“ But it’s so overwhelming. Where do I even start?”

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 and 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.

What are Good Bookkeeping Practices?

Daily tasks

  • 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. It provides an internal and external audit trail that will come in handy if you are called upon to explain your company’s finances.
  • Invoice your customers or clients as soon as the sale or service is completed to avoid delays.
  • Make cash deposits every day. Record both your cash and electronic payments in the proper journal section at the end of each day.
  • Run a daily cash flow report to stay informed on day-to-day operations. Make any needed adjustments.
  • Back up your financial files using a primary and redundant backup source.

Weekly Tasks

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

Monthly Tasks

  • Meet with your bookkeeper and/or accountant for your monthly financial review.
  • 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 sub-ledgers and that there are no errors.
  • Send out monthly statements to your clients or customers. Add “reminder statements” for those that are overdue.
  • Refine your collection policies to coordinate with your aged Accounts Receivable reports.

Quarterly Tasks

  • Work with your tax advisor to prepare and file your quarterly taxes. File all reports on time for sales taxesemployee payroll taxesGST (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. Then consult with your tax advisor on how changing regulations will affect you and your business.
  • 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? Do I need to trim expenses or delay major purchases or acquisitions?
  • Complete an inventory of all relevant items (if your company has inventory and equipment).
  • Ensure that whatever system you are using your data is backed up and secure.

The Benefits of Good Bookkeeping

Continuous monitoring and refining of your business roadmap show lenders/investors that you are responsible. Not only that, but your year-end financial responsibilities will be easier by implementing these habits into your weekly schedule. The real value of good bookkeeping practices 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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