Author: greatbridgebookkeeping@cox.net

Have you thought about hiring someone to do the bookkeeping for your business but you just can’t decide if it would be worth the money?  I get a lot of clients who have done their own bookkeeping for months, or even years, before calling me and they say they wish they’d called sooner.  So what are some of the benefits of hiring an independent or freelance bookkeeper?

Time.  A lot of business owners spend several hours each month trying to get transactions entered into their accounting system.  Even more business owners start out thinking they’re going to do the bookkeeping themselves but then find they don’t have the time to enter anything into their accounting system and they have no information about how the business is doing.  While a bookkeeper may charge a pretty hefty hourly rate, remember that bookkeepers do this for a living so something that takes you several hours a month to complete may only take a bookkeeper a couple of hours a month to complete.  That makes the overall cost reasonable.  Imagine getting all of that time back to spend on what you do best-growing and managing your business!

Information.  The more information you or your bookkeeper tracks in your accounting system, the more information you’ll be able to get out of it.  Having a regular bookkeeper can allow you to look at financial reports on a monthly or quarterly basis.  You’ll be able to see where your money is being spent and who you’re making the most money from at a glance.  Better information means better decision making and should help you grow your business.

Expertise.  I talk to many clients who have attempted to do their own bookkeeping but didn’t get any training so they’re really guessing what to do.  A good bookkeeper knows how to properly record your income and expenses…and help you clean up improperly recorded items.  Bookkeepers do this for a living and should have had some type of accounting training so they know how to handle both the everyday transactions generated from running a business as well as those things that only occur occasionally.  And, having a bookkeeper means having someone who can answer most of your accounting questions and help you decide how possible changes to your business can impact your finances.

Peace of mind.  Even if you have employees who enter information into your accounting system, having a bookkeeper reconcile your bank and credit card statements provides a level of separation and helps deter or detect fraud from your employees as well as spotting bank errors.  Bookkeepers can also assist with compliance issues such as filing sales tax returns and 1099 forms.

Only you can decide if it’s worth the investment for your business.  Many bookkeepers offer free consultations so it doesn’t hurt to reach out and see what one has to say!

Hopefully if you have employees, you’re using a payroll service to help you process accurate paychecks and file and pay your employer taxes on time.   These services come in the form of either a built-in module within your accounting software or a third-party company.  Regardless of how the service is delivered, it’s important to understand exactly what you’re getting.  You need to know whether your payroll processor is actually paying your employer taxes and filing the tax forms with the government on your behalf or whether they’re just providing you the forms and numbers to do so yourself.

If you’re not sure which type of service you have, here are some suggestions.  Look for tax forms noted with words like ‘for your records only, do not file’, look for tax payments coming out of your bank account in addition to the regular payroll check amounts, or look for tax deposit notices outlining the dates and types of taxes paid on your behalf.  These typically mean that the payroll service provider is doing all filings and payments for you.  If you don’t see any of these items, it’s time to call your payroll service provider and discuss exactly what they do for you.  If you don’t want to handle the payments and filings,  it might be time to upgrade to a plan where the processor takes care of these things on your behalf.

Just remember that as the employer, you’re ultimately responsible for filing and paying your taxes on time so it’s always a good idea to check behind anyone who’s doing these tasks for you.

What does it mean to categorize transactions?  It means that you tell QuickBooks, or any other accounting software, what type of income or expense a particular bank transaction was for.  I see a lot of clients with bank feeds set up in QuickBooks so all of their bank transactions are being downloaded but everything is going to a misc. or uncategorized expense.  This does not give you useful information.  There is no way to tell how you’re spending your money.

When you categorize expenses, you’re telling your accounting system specifically what you spent your money on or where your money came from.  The categories you choose from are really all of the accounts on your chart of accounts.  The more transactions you categorize, the more detailed information you’ll have in your accounting system to help you make decisions.  Instead of knowing you spent $10,000 last month, it would be better to know that you spent $3000 on advertising, $5000 on rent, and $2000 on office supplies.

All transactions should be categorized in order to give you the best idea of how your business is performing.  Knowing where you spend your money will help you spot where you might be overspending and help you make better decisions to grow your business.

When you are adding transactions to QuickBooks and you’ve paid or received money from a new source, QuickBooks prompts you to add the new source.  It gives you the option to add this person or business as a Vendor, Customer, or Other Name.  So what’s the difference?

Generally speaking, anyone you pay money to should be added to QuickBooks as a vendor.  For example, you may receive goods or services from a person or business, pay a subcontractor to do work, or pay commission to a sales rep.  All of these transactions should be recorded to a vendor.

Generally speaking, anyone you sell goods or services to and receive money from should be added to QuickBooks as a customer.  

So why is Other Name even an option?  Many small businesses will never need to use anything other than vendor or customer, but there might be times when you want to track other types of information not directly related to paying or receiving money.  A common example of this is if you want to track sales by sales rep or location, then you might consider setting up each sales rep or location as an Other Name.  That will allow you to run reports where sales are separated out by the Other Name coding.  However, if you later pay commission to sales reps, they should be set up as vendors (or employees) as well.  Also keep in mind that reporting for Other Names is not as robust as reporting for Customers and Vendors so you might lose some reporting capabilities if you incorrectly set up Vendors or Customers as Other Names.

Can a business or person be more than one type of contact in QuickBooks?  Yes!  As an example, there are times when you use a customer as a vendor.  Maybe an office cleaning company has a customer that sells air conditioning units.  That air conditioning business is a customer of the cleaner but if the cleaner used them to replace their old A/C unit, they would be a vendor of the cleaner as well.  In this instance, just set up the air conditioning company in QuickBooks with the same name but differentiate the vendor entry by ending it with (v) and the customer entry by ending it with (c).

Did you know…one of the best things you can do for the financial health of your business is reconcile your bank and credit card statements each month.  Not only will this help you spot fraudulent transactions but it also helps you make well-informed decisions.  After all, if your cash or credit card balance is wrong chances are good that something else is wrong as well.

In QuickBooks desktop go to the Banking menu and choose Reconcile then pick the account to reconcile from the drop down list.  In QuickBooks Online go to the gear icon in the top right and choose Reconcile then pick the account to reconcile from the drop down list.  After that, enter the statement closing date and closing balance to begin.

The goal of a bank or credit card reconciliation is to make sure that all transactions on your statement are recorded in QuickBooks.  So start clicking the items in the QuickBooks reconciliation screen that match your statement.  If all transactions match, your difference displayed on the QuickBooks screen should be $0.  If it’s not then go back and add, delete, or edit transactions accordingly.

But before you click the button to finish that reconciliation, take a moment to see what you didn’t check off.  What doesn’t match your statement is just as important as what does match.  If you have checks that you wrote recently that didn’t clear by the end of the month or a credit card transaction that didn’t post before the statement was generated, it’s OK to still see those items unchecked on your screen.  They’ll show up next month to be reconciled.  But you may have duplicate transactions or incorrectly recorded payments or deposits unchecked and those signal problems that need to be corrected before completing your reconciliation.

Even though regular and successful bank and credit card reconciliations don’t guarantee that your books are error-free, they are an important part of making sure your financial data is in good health!

It’s important to make sure that your company’s financial data is backed up regularly.  Fortunately, QuickBooks makes it easy to see when the last backup was done and to schedule future backups.

When was the last time my QuickBooks data was backed up?  Go to the Home page and look at the right side of the screen in the box titled Backup Status.  This will show the date and time of the last local backup.  If it’s been a long time since your last backup or you’ve worked in your QuickBooks company a lot since the last backup, it’s time to do it now!

How do I schedule backups?  Click on File at the top of the screen then go to Back Up Company then Create Local Backup.  To schedule future backups, choose to save a Local Backup, click Next, then Only Schedule Future Backups.  Once you click next, you can pick how often you want to backup your file either based on how often you close your file or based on a schedule.  Click the options button in the Create Backup box to tell QuickBooks where to save your backup files and to tell it to perform a complete verification when backing up.  It’s recommended that backups not be saved on your local hard drive but instead to some type of portable media such as an external hard drive or cloud drive.

How do I create a one-time backup?  Click on File at the top of the screen then go to Back Up Company then Create Local Backup. To create a one-time backup, choose to save to a Local Backup, click Next, then Save It Now.  When you click Next again, you are able to navigate to where you want to save the backup.  Again, it’s recommended that backups not be saved on your local hard drive but instead to some type of portable media such as an external hard drive or cloud drive.  Choose your location, click Save, then you’re ready to go!

Did you transfer money from your business checking account to pay your credit card bill?  Did you move money from your money market account to your operating account?  Did you know you can transfer funds between balance sheet accounts in QuickBooks when you do one of these things?  It’s easy!

For QuickBooks desktop, go to the banking menu and select Transfer.

For QuickBooks Online, go the plus sign to Add, then under the Other menu, select Transfer.

All you have to do is tell QuickBooks which account the money came out of and which account it went to, write a memo so you remember why you transferred the funds, then save.  It’s that easy!