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7 Steps For Foolproof Accounting Books

By News Creatives Authors , in Small Business , at September 9, 2021

Like it or not, managing your accounting books is all part of being a business owner. And if you’re like the majority of entrepreneurs, you probably worry about making accounting mistakes that can hurt your business in the long run. So, what’s a business owner to do? I have one solution: Learn the steps for foolproof accounting books and how to use them to look over your books in-between visits with your accountant. 

Steps For Foolproof Books

Mastering the art of accounting takes time, patience, and a few steps. If you want your accounting books to be accurate and reliable, check out these seven must-do steps to do in between check-ins with your accountant. Foolproof accounting books, here we come!

1. Learn The Basics

For foolproof accounting books, you need to go back to the basics. Well, the basics of accounting, that is. 

For accurate and infallible books, get to know the basics of accounting before jumping to record any business transactions. If you’re new to the accounting world, brush up on:

Your accountant should also be able to help you understand the basic accounting concepts so you can manage your books in between check-ins. 

If you’re an experienced entrepreneur or have a good grasp on accounting 101, you probably don’t need a refresher. But, it never hurts to research and expand your accounting knowledge. 

2. Record Each Transaction 

This next one may seem obvious, but as a busy business owner, it can easily slip your mind: record each and every transaction in your books.

Forgetting to record a transaction in accounting can cause a boatload of issues, including inaccurate reports and totals. So to ensure your books are in tip-top shape, record each transaction in a timely manner.

Try to record transactions regularly, like weekly or monthly. Now, I know it can be hard to stay on a strict schedule when you already have so much on your plate. But, try to stick to a schedule as much as possible. That way, you can keep your books up-to-date and accurate. Not to mention, it can prevent you from forgetting to record a transaction altogether. 

If needed, find unique ways to remind yourself to record transactions. Set an alarm, mark your calendar, etc. Do whatever you need to do to make sure you record transactions as soon as possible.

3. Use Accounting Software

There are a number of ways you can go about recording transactions in your books. My best recommendation? Use accounting software in conjunction with an accountant. That way, you can avoid time-consuming tasks, manual books, and errors.

Accounting software can be the best of both worlds for business owners and their accountants. Find an affordable accounting software to keep you organized, and you’ll spend less time trying to decipher your books. Your accountant will love you for it, too. 

Plus, accounting software can do some of the heavy lifting for you, like calculating totals and creating reports. Not to mention it can also automate certain tasks, like converting estimates to invoices and sending payment reminders.

Although accounting software can mitigate calculation mistakes, using software in conjunction with a tax professional can make them even more accurate. If you go the accounting software route, find a solution that has easy reporting and access so you can quickly pull reports for your accountant. 

4. Retain Documents

A big part of accounting in business is ensuring you record transactions in a timely manner and keep documents to back up your records. Hence, my next step of retaining documents.

So, you might be wondering, Which documents should I have on hand? Some documents you should keep in your records include:

  • Receipts
  • Invoices
  • Business bank statements
  • Payroll records

Of course, the above list isn’t all-inclusive. Keep the documents you’d need in case of an audit. Not sure which documents to save or not to save? When in doubt, store any records that can back up your recorded transactions. Hint: Your accounting software should have a feature to store your documents on your journal entries or bank transactions. You’ll never need to hunt for loose pieces of paper again.

5. Double-Check Entries

Another major step to foolproof accounting books is double-checking entries, especially if you’re doing accounting by hand.

Double-checking (or even triple-checking) your entries can save you from making accounting mistakes. And in turn, could prevent you from dealing with accounting issues for years to come (which is something no business owner wants to deal with). 

Before you finalize anything in your books, double-check to make sure the amounts and impacted accounts are accurate. Do the same before you close your books at the end of a period and at year-end, too. After all, it never hurts to double, triple, or even quadruple check. Of course, your accountant will be checking your books, too. But ultimately, it starts with you to provide the correct day-to-day information.

6. Keep Personal Transactions Separate

Peanut butter and jelly? Go together. Personal and business funds? That’s right—they don’t go together. To keep your books error-free, separate your business and personal income and expenses.

Separate your personal and business funds to:

  • Avoid confusion
  • Keep records clear
  • Make claiming deductions easier
  • Track which funds are yours and your business’s

Mixing funds can make records muddled and disorganized. And, it can cause a ton of confusion come tax time. To steer clear of an accounting catastrophe, consider opening a separate bank account for business

Keep in mind that you may have no choice but to open a separate account. Some business structures require owners to open a separate account for business. And if you operate under a DBA name, you may need a separate account, too. 

7. Watch Out For Red Flags

Want flawless accounting books? If so, you need to know which red flags to watch out for when recording transactions and reviewing your books. 

Keep your eyes peeled for:

  • Accounting mistakes
  • Transposition errors
  • Omission
  • Data entry
  • Duplication
  • Changes in trends (e.g., cash flow)
  • Numbers that seem too good to be true
  • Unusual anomalies 

The more you watch out for warnings that something is wrong, the better off your books will be. So my friends, stay on watch for accounting mistakes and changes in your books (e.g., spikes in expenses). And, take all of the necessary steps you need to get your books in shipshape (ahem, #1 – #7).

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