30 Best Bookkeeping and Recordkeeping Tips

Bookkeeping Tip #1: Create a Strong Password Make sure all of your passwords are as strong as possible and easy to remember. Here’s one way to set up a strong, memorable password: pick a phrase you can remember—maybe a song title you like. Use the first letter of each word; add some letters to identify your account, and maybe put in the year you set up the account. Here’s how it would look: Let’s say we are setting up a password for a Chase Bank account and you picked the song “All My Exes Live In Texas.” I know it’s not the most virtuous song, but it’s the first song that came to my mind. So your password would look something like this: CB18amelit.  And another password for your Capital One credit card would be CO19amelit. You get the idea. Bookkeeping Tip #2: Safeguard Your Bank Transfers Safeguard your bank transfers by requiring a second authorization for all wires or bank transfers.  Each wire transfer would require both an originator who requests it and then a separate transfer authorizer (a two-party approval system). Bookkeeping Tip #3: Look Out for Fraudulent Banking Websites Don’t trust what looks like an authentic banking website if it asks you for additional information or gives you a new email address for the bank.  It may be an example of phishing (baiting you for your email, passwords, Social Security Number, Bank Account, and other relevant personal information). Consistency is key here, so set up a bookmark in your browser and always use that same link to access your banking sites. Bookkeeping Tip #4: Beware of Authentic Looking Emails   Some unscrupulous people will send emails to your organization’s bookkeeper that appear to come from a coworker requesting a payment be sent. The wording can even sound legitimate and can contain specific details of your organization. Sometimes the only red flag is that it is coming from an incorrect email address. Double-check where your email is coming from and take the time to report it as spam or fraudulent email. Bookkeeping Tip #5: Use a Dedicated Browser for Online Banking You may consider using a dedicated browser for your online banking.  You can choose the most secure browser then access your financial institution and bookmark the URL.  I even go to the effort of setting up folders in my browser to simplify things for the next time. Here’s an interesting post from VPN Mentor about the most secure browsers to use. Bookkeeping Tip #6:  Monitor Online Banking Transactions Often Monitor your online banking transactions often to try and catch any fraud quickly.   This is basically a quick scan to make sure no unauthorized transactions have taken place. Check to see if your financial institution offers a notification whenever new purchases are made or large withdrawals take place. This will alert you to possible fraud. Bookkeeping Tip #7: Don’t Use A Public Wi-Fi Spot to Check Bank Balances Don’t use a public Wi-Fi spot to check your online bank account balance, make online purchases, or to do any other activity that requires that you enter the sensitive information you want to keep safe.  Cyber thieves can steal not only your password but your account number very easily. Check out this post from The Balance called Is It Safe to Bank on Wi-Fi? Bookkeeping Tip #8: Keep Receipts for Backup If you are ever involved in an audit you will understand the reason for this tip.  Every expense you record on your books must be substantiated; if not you risk losing the deductible expense and may have to pay interest and penalty due to increased income. Write pertinent information directly on your receipt at the time you receive it. If you are at a restaurant with a client, it is best to write directly onto the receipt the purpose of your meeting, whom you met, and then file it away. It’s best to store them in a receipt organizer by year and keep your receipt organizer with your tax return. Bookkeeping Tip #9: Quick Tip to Copy Your Screen How many times have you wanted to share your screen with someone to explain something with an image? You can with the Windows 10 or newer Snip feature. Hold down the Shift key, Windows circle icon, and the S button until the screen darkens then use your mouse to highlight the area you want to copy. Once the little pop-up shows your image, you can just add it to an email and you’re done. Bookkeeping Tip #10: How to Determine Which Expense Categories to Track Determine which categories to track by starting at the end. Look at the categories listed on the tax return you are required to file at the end of the year. Your accountant or tax preparer can help you with this. For instance, let’s say you are operating a small business and will need to file Schedule C as part of your tax return. Use the categories listed on Schedule C to help you determine the categories to track throughout the year. Most accounting software programs allow you to choose a set of categories to help you get started, and you can customize your list from there. Big E-Z is no different. We have sets to choose from and we even go a step further to give our clients a free 30-minute screen share meeting to help with setup and customization. Bookkeeping Tip #11: Set Up Your Accounting Software Correctly One of the biggest mistakes people make is not taking the time to set up accounting software correctly. The old saying “Garbage in, garbage out” applies here. If you want financial reports you can trust, you will need to be sure they are set up properly from the get-go. This means having good starting numbers; the previous year’s Balance Sheet is a good place to get those numbers. Have someone help you with this if you don’t feel confident in setting up your own system. You may be better off with a service to help you get started, and then it is handed off to you to keep up. Bookkeeping Tip #12: Uncashed Payroll Checks Most employees receive their wages directly deposited into their bank accounts nowadays but if you are issuing paper payroll checks be sure to contact your state or consult with an attorney before voiding them. This would most likely only happen if you terminated their employment and the check was never cashed. It appears most states have a process called escheatment which allows the state to hold on to the money until it is claimed. The funny thing is I was researching the unclaimed money website and thought I would enter my information. To my surprise, there was unclaimed money for me! It was under $100 but fun just the same. Check it out at the National Association of Unclaimed Property Administrators website and click on Find & Claim. Good Luck! Bookkeeping Tip #13:  Refund of Overdraft Charges If you are charged with an overdraft charge and it is truly a rare occurrence for you, then give the bank a call. Most banks and credit unions will gladly reverse the charge just for the asking. The words to ask are, “Would you please waive this overdraft charge?” and they usually will, especially if this happens only once every year or two. Give it a try. Bookkeeping Tip #14: Keep Accounting Records Up to Date Scenario 1: It is October and you have all your transactions entered and categorized in your accounting system. You give a year-to-date financial report to your tax accountant to help you plan for next year. You are so ahead of the game. Pat yourself on the back! Scenario 2: It is October and you don’t have your records entered, categorized, or up to date in an accounting system. You know the year-end is coming soon, but the thought of spending hours to get caught up is overwhelming you so you put it off. You are behind the eight ball and it is not a good feeling to be pushed around to get things done. We can help! Step 1: Download and save your banking transactions. If you have gotten behind it is so important to at least grab your banking transactions and download them (in CSV or Excel format) now before too many months go by and they are not accessible any longer. Yes, the banks have a cut-off. Some banks give you years to download your statements and transactions while others give you only 6 months. Step 2: Import your CSV file into Big E-Z.  Choose between the Google Sheets Add-on or Windows PC versions. Get the system set up with our help and get your records caught up. Step 3: Pat yourself on the back. Bookkeeping Tip #15: You Are Taxed on Profits, Not Revenue Many business owners think they are taxed on the money they take out of their business or the income the business receives. In fact, if you are a sole proprietor (rather than a corporation) you are taxed on the profits of the business—not the revenue. Your estimated income tax payments should be based on the profits of the business. This is why it is so important to record and keep receipts for every deductible expense possible. Bookkeeping Tip #16: Cash or Accrual Accounting Methods Choose the right accounting method…CASH OR ACCRUAL. Cash does not mean currency here. It’s just called the Cash Method, and it means you are tracking income when you received payment (not the date you billed it) and you are tracking expenses on the date you wrote the check (not the date your vendor billed you). The Cash Method is much simpler for small businesses and nonprofits to use. In fact, the IRS only requires that you use the Accrual Method if you have $5 million in sales or carry a large inventory. That excludes most of us! Bookkeeping Tip #17: Make Immediate Deposits It is best to get into the habit of depositing all cash immediately at the bank or credit union once it is received. This ensures that all income will be properly recorded and accounted for. Bookkeeping Tip #18: Converting from an Old Paper System or Excel Worksheets to New Accounting Software When going from a paper bookkeeping system or from using Excel worksheets to a new accounting software program, you may want to run dual systems for a few months. Yes, it’s a lot of extra work but can be well worth it. The object here is to be sure both systems come up with the same totals before dropping the older system. Bookkeeping Tip #19: Personalized Note Pads For a very professional look consider using printed notepads or sticky notepads with your company name,  phone number, and your slogan at the bottom. This is an impressive look and can be a real time-saver. If you also print the pad with “From the Desk of . . .,” plus your name, you’ll never need to sign your name. This can add a more professional look to the notes you send out. Bookkeeping Tip #20: Know the Many Ways People Embezzle Be aware of the different ways people embezzle. You work hard for your money and to see it disappear on your watch can be devastating. This 2018 Hiscox Embezzlement Study estimates the median amount that an employee embezzles is approximately $357,650.  (from $250,000 in 2016). Take a look at this list of 25 Examples of Embezzlement and Workplace Theft put out by Small Business Trends and try to prevent this from happening to you. Bookkeeping Tip #21: File Folder Systems Start new file folders at the beginning of each year for all your paid invoices and another set for your paid bills. It’s not necessary to have a folder for each customer or vendor unless you do a large volume of business with that customer. You could get by with just a few folders for all customers from A-C, D-F, and so on. Everyone files their records in a different way. You could file with the oldest in the back of the folder so you can just drop the newest in front. If using voucher checks, always staple the check stub along the long part of the paid bill. This way you can still see the vendor’s name in the upper left corner but more importantly, when you drop the paid bill into the folder all the names on the stubs are on top and easy to read. Bookkeeping Tip #22: Storage Boxes for Each Year Keep all your records for one year in one box.  In that one box you can put a copy of your tax return, bank account statements, your monthly reports (video) from your bookkeeping software, receipt storage book, financial statements from your accountant, your paid bills, and receipts to document paid expenses for that year. Label it with the year and contents on the outside of the box. Then store it somewhere accessible. Bookkeeping Tip #23: Check Out Credit Unions for Lower Fees  Some credit unions offer free business checking accounts and loans at lower rates than most banks. Check them out the next time you need to reprint checks or open a new account. And if you’ve been turned down for a loan by a bank, you might find a credit union happy to extend financing—even at a lower interest rate. Bookkeeping Tip #24: Set Up a Petty Cash Box Almost all small businesses make small cash purchases. You may want to set up a Petty Cash Box to keep control of those purchases. Get yourself a metal cash box or some kind of container and put in currency and coin that total $100.00, for example. This will be your starting point. The value of this box should remain at $100.00 at all times including currency and receipts. For example, let’s say you or your employee purchases a notebook at the local office supply store for $5.00, using money from the Petty Cash Box. When you get back to the office you will put your receipt in the box. Now you should have $95.00 in currency and one receipt for $5.00. The value of your box is still $100.00. When you deplete the currency in the box, you add up your receipts and write a check payable to “Cash” for that amount, take it to the bank to cash it, and return the currency to the Petty Cash Box. Once again you have $100.00 in the box. Bookkeeping Tip #25: The Dos and Don’ts of Bank Statements  Bank account statements are so important that you may want to keep both a paper version and an electronic version for backup purposes in case of an audit. Don’t just throw the statements in a drawer. As soon as your statement arrives, review it before anyone else sees it, including your bookkeeper or employees. That way you can catch unauthorized checks. Always, always, always keep your statements! In case of an audit, you would need to provide them, and the bank charges for copies of old statements can get real pricy very quickly. Bookkeeping Tip #26: Deposit Ticket Books How do you handle your bank deposits? One easy way is to record your daily deposit in a deposit ticket book. Generally, these books come with a white (original) copy and yellow (duplicate) copy in books of 50. For a small business, an order of 200 duplicate deposit tickets could last 2 years unless you make deposits every day. As you write each deposit ticket, give the original copy to the bank and leave the duplicate (yellow) in the book. That way nothing gets lost.  We can provide you with these imprinted deposit ticket books  or you can get them at your local bank or credit union. Bookkeeping Tip #27: Keep Good Records Many business owners find bookkeeping daunting and the process of keeping good records overwhelming. Think of it this way–bookkeeping is the glue that keeps your business together. If your records aren’t in good shape, the business could possibly fall apart. A healthy business is monitored through its records on a regular basis so you can find problems and correct them before it’s too late. The key to keeping good records is to use a program that fits your needs well, is easy to use, and is easy to train someone without accounting knowledge. Big E-Z software programs can help you do just that. Bookkeeping Tip #28: Be Consistent Consistency is essential to successful business bookkeeping. Whether you use software or a paper bookkeeping system or anything in between, always be consistent. For example, if you reconcile the checkbook around the 7th of the month, continue doing this throughout the year. Or if you file receipts in date order from oldest to newest, continue to do this through the year. This small matter of consistency will save you and your accountant time and prevent aggravation. Bookkeeping Tip #29: Business ATM Cards and Smart Phone or Mobile Deposits Save time by using an ATM card to make your business deposits. Many ATM machines give you a check image when you make a deposit. The ultimate time-saver is using your mobile phone to make deposits. Check to see if your bank or credit union offers a mobile app for deposits. They usually have you take a picture of the check (front and back after you endorse it) and it goes directly into your account.  If possible do this from your office or home, not from a public Wi-Fi spot! Bookkeeping Tip #30: Last, But Not Least–Keep An Audit Trail An audit trail is nothing more than a record of all your invoices and checks in numerical order. The thing to remember is to never skip numbers. Record voided checks and invoice numbers in numerical order with all other checks and invoices, and don’t forget to note each one that is “voided.”  This ensures there will be no gaps in your numerical sequence and leaves a proper audit trail.