8 Bookkeeping Tips to Clean Up Your Business Day-to-Day Money Management

Everyone talks about small business finances and taxes, but that’s just the tip of the iceberg. Beneath that tip, all the little daily things go into it, like bookkeeping and day-to-day money management. And it’s a shame that we as small business owners don’t talk about these things more, because really, this is where we need to put in the time and thought if we want to make that tip of the iceberg less scary too.

For me, this is what it all boils down to when we start talking about money management and bookkeeping services. Without clear processes for managing the transactions you handle every day, you’ll end up dreading those meetings with your accountant, where most of that time is spent asking you, “What happened with this transaction?” or “Where’s the documentation for this?”

It doesn’t have to be that way, of course–either for taxes or for accountant meetings. It’s when your day-to-day money management is out of whack that you’re left scrambling to find records that should have been well-kept all along. When that happens, you end up with some scary cash flow situations and being far off budget when it’s much too late to do anything about it.

So! Here are some things that I wish I’d done earlier in my own small business journey.

1. Set up accounting software or a general ledger (GL).
Have some kind of system in place so that you can track both incoming and outgoing transactions; better still, make sure that it can also generate daily, weekly, and monthly reports. A lot of folks think that having their bank account and their payment gateway (ex: PayPal, Venmo, or Stripe) on hand will be enough for record-keeping. However, those financial tools only track sales, not budgets or expenses; they also don’t generate financial reports like balance sheets or profile and loss (P&L) statements. But you’ll need those reports for a variety of business matters, which range from strategic planning and seeking investors to applying for loans or grants and getting ready for tax season. Plus, as The Balance reports, other advantages that small businesses will enjoy from using accounting software include having a centralized financial resource, greater financial accuracy, and simplified financial management processes. 

2. Know and understand your chart of accounts.
Basically, whenever money goes out or comes in, every transaction should be assigned to an account to show what the money was spent or received for. These accounts are a list called the chart of accounts. You can have an accountant set up this chart for you, or depending on your bookkeeping savvy, create one yourself. Your chart of accounts should be set up to reflect your company’s specific needs, too. After all, different industries and business types spend and receive money in different ways and on different things. Plus, beyond being able to categorize and track transactions as they happen, having a chart of accounts can also show you the big picture of your company’s financial health and help you comply with applicable reporting standards. Knowing your chart of accounts makes it easy to assign an account to a transaction when you spend or receive as transactions happen daily. This way, you won’t get to the end of the month, and transactions have not been recorded to the correct account.

3. Track, monitor, and approve spending according to your budget.
Ok, it’s true–first of all–you need to have a budget for your business.  But it does no good to have this budget in place if you aren’t monitoring and adjusting it regularly, or if you’re not making spending decisions based on it. A good business budget will help you figure out every dollar’s “job”: is that money meant to be helping you grow, scale, pay off debt, or something else? Check out the Managing Money back office planner from Sistahbiz or check out industry names like Nerdwallet and Smartsheets that also offer lists of free small business budget templates that can get you started strong with low-cost or no-cost options.

4. Track and categorize sales and inventory.
Keep a close eye on your sales too. While the flow will fluctuate depending on how many transactions you’re processing during any given period of time, you should be tracking your progress against sales goals. At a minimum, monthly, and weekly or daily if your numbers are changing fast enough. Looking at your sales numbers this often will let you know if you’re on track or if you need to make shifts to meet your sales goals. Monitoring these numbers too infrequently will make you lose time that you could’ve used to act swiftly and implement a different strategy to bring in sales when numbers were lagging. If your company manages product inventory as well, then having an inventory system in place can prevent certain disasters. Luckily, there are low-cost, easy-to-use software systems offered by QuickBooks Commerce and even Square that can help you manage inventory and track your sales against those numbers.

5. Track accounts receivable (AR).
If your company invoices clients as a way of collecting payments, then make sure you have a process in place for making sure this gets done on time. For starters, consider using a small business invoicing program like Wave, InvoiceNinja, or even Square or PayPal invoices: this will give your clients a speedy, secure way of paying you. Also, make sure that you set up clear terms and hold your clients to them – in other words, let clients know how your invoices work and when they are expected to pay them. And as you go, keep a “accounts receivable aging” report, which is a report listing out any unpaid invoices or credit memos, all organized by date. This will help you track any money you’re still owed and see who you need to follow up with on overdue or delinquent accounts. Overall, knowing how much money you have in your AR – and how much money should be in your AR – will be critical to the success of your business.  

6. Utilize bank account notifications.
Use your bank’s notification features, whether those are for transactions, balances, or just activity. Something I’ve done – both as a solopreneur and now as a microbusinessCEO – is to set up a daily text notification from my various business bank accounts. This way, I can see what my balances are daily, and if anything looks weird, I’m on it immediately. You can eliminate unwelcome surprises by keeping track of your accounts on a daily or weekly basis – and without having to go through the trouble of logging on and scrolling through your accounts every time, too. Even better, these notifications are free from most banks. 

7. Set up a monthly financial reconciliation.
Even if you’re doing all these other tracking and monitoring activities, don’t forget to have an accountant reconcile your books monthly. Set up this service so that it happens like clockwork each month – reconciliations are an important way of checking in on your cash flow and “true cash position.” So, discuss with your accountant what they’ll need from you in order to do this work and set up systems to help them do the job with minimal input from you when the time rolls around. And there you go – that’s one fewer of those meetings you were dreading earlier!

8. Hold a monthly meeting with your accounting team.
Whether you have a clerk processing daily transactions or an accountant reconciling each month, bring the accounting team together each month to review and finalize those reconciliations. You can also use this meeting to check the budget, the status of company cash flow, all progress on company sales goals, and any approaching tax or financial deadlines. It can be tempting to skip this meeting, but don’t. These are important conversations that everyone needs to be having if your company is to remain profitable. 

These are just some starting points of course, to clean up how you manage money day-to-day in your small business or startup.  If nothing else, I hope your takeaway is this: small business bookkeeping is an important part of being a solopreneur, even if you might think it doesn’t apply to your extra-small business. Take steps now to avoid crashing into the icebergs of taxes or debt later on!