Want to be a better bookkeeper? These 12 tips and strategies for better bookkeeping can speed up the process, reduce the chance of errors, and improve your reporting.
1. Get on a schedule
The easiest way to keep your books up to date is to make it a habit. Set aside a designated time every day for essential bookkeeping tasks, such as depositing checks and inputting business transactions into the general ledger.
When your books are current, monthly tasks like reconciling bank or credit card accounts and running key financial reports are less of a hassle.
Most businesses also have quarterly and annual reporting obligations. Be sure to create a bookkeeping calendar to help you keep those deadlines organized.
2. Separate your finances
Many businesses are bootstrapped in the early days—funded from the founders’ personal money. If you’re going to use personal money, there are good and bad ways of going about it.
By opening up a business bank account and maybe a corporate card, you can easily keep your business activity separate from personal activity. That makes it easier to see how your business is doing—and it’s important at tax time, too.
Plus, many corporate cards (like ours) come with rewards that help you save money. Making the switch won’t just save you time, it can help your bottom line.
3. Know your expense types
Categorizing expenses is an essential part of the bookkeeping process. This helps you understand your business spending, set budgets for the future, and get on top of tax deductions.
Some common tax deductible expenses include:
- Mileage and vehicle expenses
- Rent and utilities
- Marketing
- Employee compensation
Be mindful of big purchases that are actually capital assets. Something like buying a new vehicle or computer that provides value over multiple years might need to be treated like an asset that gets depreciated over time.
4. Know your reports
Three types of financial reports are critical to maximizing your growth over time: income statements, balance sheets, and cash-flow statements. Here's a quick description of each:
- The income statement tells you whether you're making money or losing it
- The balance sheet shows what your business owns (assets and capital) and owes (liabilities)
- The cash-flow statement reveals where your business used its cash as well as how much cash your business has at its disposal
Be sure to run and review all three of these statements at least once a month.
5. Centralize document storage
Supporting documents can help you defend your bookkeeping and prove your business activity in case of an audit. While that’s a worst case scenario, it’s a good practice to have receipts, invoices, or purchase orders that back up the work you’ve done.
Accessibility is the key. If your documents are scattered in multiple places, it can be a significant challenge to find what you need when you need it.
For digital documents, save a copy or screenshot on your computer, or better yet, in an online drive like Dropbox or Google Drive. If your company uses accounting software, it might let you store those digital receipts with your transactions.
For physical documents, make use of the camera in your phone and snap a photo right away. Just be sure to move them over to your centralized storage when you have a chance.
6. Leverage the cloud
Whether you’re coordinating with an internal team or external clients, using cloud-based software for your bookkeeping makes it much easier to work together—from anywhere.
When digital documents such as receipts are stored in the cloud, they can be linked directly to their underlying transactions, like they are in BILL, making them extremely easy to find when you need them.
Communication can also be linked directly to invoices instead of “living” in someone’s email, where they could be lost if that person leaves the organization.
Cloud-based software provides a centralized location for your bookkeeping—a single source of truth your team can always access when they need to, any time or anywhere.
7. Use automation when possible
Gone are the days of having to do everything manually. As AI and machine learning become increasingly common, more work is being automated to save you time.
When thinking about what to automate, look at the work you do most often that doesn’t require a huge mental lift. For example, you could set up a recurring invoice that automatically sends on a set schedule instead of drafting one up every month.
Remember, not every form of digital bookkeeping is the same. Spreadsheets can’t enter data for you, automatically route invoices for approval, or send ACH payments.
To take full advantage of the automation efficiencies available today, consider software that’s designed specifically for automated, cloud-based accounts payable (AP) bookkeeping.
8. Track your receivables and payables
There are two sides to business cash flow: getting paid and making payments. You don’t want to fall behind on either.
Invoices can go unpaid for completely innocent reasons. Review your outstanding accounts receivable and don’t hesitate to send reminders to customers with overdue invoices.
Make a note of any customers who are often behind in their payments. You might need to give them stricter payment terms to help mitigate that risk.
Spend similar time reviewing your outstanding accounts payable for invoices that are approaching their due dates. You should regularly plan ahead for upcoming payments to avoid any cash flow problems.
Set reminders in your calendar or use software built for accounts payable and accounts receivable to keep up with due dates. You don’t want to sour relations with your customers or suppliers.
9. Properly account for cash
Cash activity can be troublesome. While other payments like credit cards or checks have some level of recordkeeping baked into their use, cash transactions depend entirely on receipts for verification.
Set up a method of tracking cash like a physical ledger, spreadsheet, or even a notes app on your phone if you’re on the go. What matters is that you stick to it and transactions get added to your accounting software when you can.
Better yet, if your company is using petty cash to give employees a controlled way to make small purchases, consider a corporate card solution that lets you limit spending automatically. That way, you can fund those cards with small amounts, maintaining your control over spend while giving your employees a payment method that’s both convenient and trackable.
10. Know your deadlines
The big deadline everyone thinks about is year-end tax filing, but there are other tax deadlines you should keep in mind too, including deadlines for filing sales tax, state income tax, and various wage-related taxes.
Outside of taxes, you’ll probably have other deadlines too, such as monthly reconciliations and reporting—or preparing the books for a loan application.
Set reminders for deadlines you have coming up to give yourself time to complete the bookkeeping confidently—and remember to stick to the schedule you created. Being under a time crunch can lead to mistakes.
11. Forecast
Where does your business appear to be headed, in both the short term and long term? What's the outlook for profitability, expenses, cash flow, and capital needs? A business forecast can provide the answers.
A forecast should take into account all of your expenses and expected revenues, covering both best- and worst-case scenarios, with projections that can help you set realistic goals and make better managerial decisions. It's also a valuable resource to share with potential lenders or investors.
If you’re not sure where to get started with forecasting, BILL Cash Flow Forecasting can help.
12. Outsource your bookkeeping
Most small-business owners are spread pretty thin. Having the time—and skills—to stay on top of the bookkeeping every day isn't always realistic. If you're not ready to hire a full-time resource for the task, outsourcing might be a good solution.
A skilled bookkeeping resource can make sure your business follows bookkeeping best practices throughout the year. They can keep your books clean (and audit-ready) while also helping you interpret the numbers and offering guidance on forecasting and financial planning.
Supplying data to your CPA at tax time is another bonus.
How automation transformed bookkeeping for Aldridge, Borden & Company
Both businesses and accounting firms use cloud-based technologies and automation to streamline their workflows and deliver consistent results.
Aldridge, Borden & Company chose BILL to save at least 50% of the time they used to spend on accounts payable. Beyond that, integrations keep numbers clean and up to date, helping them scale their operations quickly and efficiently—to match any level of growth.
By using BILL to provide a cloud-based bookkeeping model, the firm doubled the department’s revenue in just 3 years.
Want to learn more? Explore how BILL can help your bookkeeping team boost efficiency, accelerate growth, and expand into new service offerings.
Better bookkeeping FAQ
What is the hardest part of bookkeeping?
Different bookkeeping tasks will be harder for different types of people, but the one difficulty of bookkeeping that affects everyone is making time for it.
For businesses big and small, it’s tough to find time to do the daily work of bookkeeping when you’re looking to the future and thinking about growing your operations.
But that’s exactly why (and when) you need to do it. Keeping your records up to date gives you the information you need to make data-backed decisions and drive business success.
How stressful is bookkeeping?
With a heavy emphasis on deadlines and accuracy, bookkeeping can get pretty stressful. It’s important to stay on top of it, but you should also listen to yourself and know when it’s starting to weigh on you.
To make bookkeeping more manageable, update to an accounting system that offers AI and automation to ease your workload.
Is it worth paying a bookkeeper?
Whether a specific business would benefit from a bookkeeper depends on several factors
- How many hours are you spending on bookkeeping?
- What value do you put on your time?
- How stressed are you about the accuracy of your books?
- Will your bookkeeping get more complicated in the future?
As you answer these questions, you can start to do some back-of-the-napkin math to figure out if it’s worth paying a bookkeeper.
The easiest way to check is by multiplying the hours you spend bookkeeping every month by the value you put on your time. If the monthly rate of a bookkeeper is less than that, you may have your answer.