Your Guide to Stress-Free Bookkeeping: Streamlining Your Systems and Avoiding Overwhelm

One of the most challenging aspects of being a small business owner is that you become a jack of all trades, often including becoming your own bookkeeper. 

Bookkeeping is a key task for any small business owner to get financial clarity, prepare and file tax returns, and support sound decision-making. 

Whether you’re just starting out or you prefer to take a hands-on approach to the numbers, if you’re doing your own bookkeeping, this guide is for you! 

The goal is to keep your systems simple, clear, and accurate so that you can stay on top of your business’s finances (and reduce tax-season stress). 

Start with the right bookkeeping software

Where will your books be recorded? The best bookkeeping software for a small business is the one you’ll use. For small and service-based businesses, an Excel spreadsheet may be all you need to begin, and is often less intimidating than learning how to use dedicated accounting software.

That being said, if you have many transactions per month, and you need features such as payroll, invoicing, inventory tracking, and financial reports, you may prefer to use accounting software. QuickBooks Online is a great small business bookkeeping tool (and the one that we use), but other popular options include Xero and FreshBooks.

For further reading: Do I Really Need Accounting Software? Excel vs Accounting Software for Small Businesses

Get organized and create a system

Before you start crunching the numbers, make sure you have a clear organizational system so that you don’t have to stop and hunt for receipts throughout. (The IRS requires you to retain supporting documents for at least seven years — may as well keep them organized now!)

Creating a simple digital system for your records

Your supporting documents (such as customer invoices, vendor invoices, receipts, and transfer details) may come in all forms: paper copies, PDFs, and images. To keep everything together, you can digitize and PDF all of your documents, and store them in a folder structure that makes sense to you. For example:

Year → Month → Folder by Category

Folder categories could include:

• Income 

  • Customer invoices 

  • Proof of payment

• Expenses

  • Vendor invoices 

  • Receipts 

  • Expense reimbursements

• Statements

  • Checking account 

  • Savings account

  • Credit card account

• Agreements and legal documents

• Income tax documents

Tip: Choose a file naming convention that will help you match documents to your bank statements. Transactions are listed by date on the statements, so you could use a naming convention such as: YYYYMMDD - Invoice Issued to keep everything in order.

Using a cloud-based filing system such as Dropbox or Google Drive can be great to use as a digital bookkeeping system since it’s easily accessible over different devices, and can be shared with collaborators, such as your accountant.

Keep your income and expense categories clear and minimal

In the example above, we categorized documents by type.

In the digital filing system, you could create folders for different categories (such as advertising expense, accounting expense, bank charges and interest, etc.), but you’ll also be doing this inside your accounting software. 

Categorizing your source documents can help you locate them when you have hundreds of documents to sift through. The drawback is you’ll also have more folders to navigate if you’re looking for support for a transaction that happened on a particular date. Typically, you enter transactions from your bank and credit card statements, which list transactions by date.

Either way, the key is to limit your folder categories just enough so that they’re easy to navigate. 

As you continue to work on your books, you’ll come up with improved ideas on how to further optimize your system for efficiency.

Understand bank reconciliations for small businesses 

Reconciliations can get complicated, but as a small business owner and DIY bookkeeper, don’t be afraid to keep it simple. 

What is a reconciliation in bookkeeping?

A reconciliation is when you agree your bookkeeping records to your statements. You can have a bank reconciliation or a credit card reconciliation. 

Whether you’re bookkeeping from a bank statement or a credit card statement, the idea is that the month-end balance on your statement should agree to the month-end balance in your books. If they don’t agree, they must be reconciled.

To reconcile a difference between the books and your statements, you may need to look for: 

• An error in your bookkeeping records (for example, a negative number recorded as positive, a missed digit, or a duplicate entry)

• An outstanding check or deposit (the transaction was initiated, but the statement hasn’t reflected it)

• Other errors, such as a payment that didn’t go through.

Tip: Remember to reconcile frequently

It’s easy to make errors in data entry, so remember to reconcile frequently! Most bookkeepers reconcile monthly, if not weekly, depending on the volume of transactions. 

Reconciling your cash and credit card balances for each month will ensure that if an error was made, you’ll only have to go through one month’s transactions to find it. This is especially helpful if you’re tackling one year’s worth of bookkeeping all at once.

If you’re using an accounting software, it likely has a reconciliation feature built in, but be sure to check its work!

Track your accounts payable and receivable — even as a small business

This is particularly relevant if you use accrual based accounting. 

On an accrual basis, income is recorded when your customer receives a product or service, which could be before they’ve made a payment. Similarly, you’ll record an expense when you’ve received a product or service, sometimes before you’ve paid for it. 

This timing difference between receipt of the good or service and receipt or payment of cash results in accounts payable and receivable. 

Even if you record transactions on a cash basis (for example, revenue recorded once the payment is received), as a small business owner, it’s important to keep track of any unpaid invoices for cash flow management.

Don’t forget to account for taxes

If you charge sales tax, remember that it won’t be immediately obvious from your bank statements. A $1,000 deposit to your checking account might include sales tax, so it’s good practice to break this out in your bookkeeping records.

In addition to keeping the books accurate, this can help you streamline tax return preparation and avoid surprise tax payments when it’s time to file. 

Find a weekly or monthly bookkeeping workflow that works for you

The key to staying organized and avoiding overwhelm when it comes to bookkeeping is to create a simple routine. Consider your weekly and monthly workflow to find a bookkeeping routine that makes sense for you. 

One way to do this: Set some time on the same day each week to complete smaller bookkeeping-related tasks, and schedule a day each month to complete the previous month’s bookkeeping. 

Here are some examples of weekly and monthly bookkeeping tasks:

Weekly bookkeeping tasks:

• Issue customer invoices and file them

• Follow up on any outstanding customer invoices

• Collect digital invoices and receipts, and scan paper receipts to drop in your digital filing system

• Pay any outstanding bills

• Follow up on missing vendor invoices

• Check your recent bank and credit card transactions online to watch for anything unusual

Monthly bookkeeping tasks:

• Log all transactions from last month based on the statements 

• Ensure your bookkeeping records reconcile to the statements 

• Update your accounts payable and accounts receivable listings

• Review financial results this month compared to last month (or this time last year) for any major changes

Keeping a consistent workflow will prevent the work from piling up and becoming overwhelming, especially leading up to tax season.

When it’s time to hand off the bookkeeping responsibilities

As your business grows, so too will your volume of transactions — and your own workload. 

We think it’s really beneficial for small business owners to spend some time doing their own books to learn about the process and get immersed in the financial ins and outs of the business. 

But when it starts taking more time than you have available, it piles on unnecessary stress, or when you simply want to partner with someone who has expertise in this area? It might be time to hire a bookkeeper so that you can get back to business.

For a clearer idea of how working with a bookkeeper can benefit your business, we recommend reading:

• How to Work With a Bookkeeper: Supporting Your Business and Streamlining Your Financial Systems

• 6 Questions to Ask Your Bookkeeper to Build Financial Confidence and Clarity

Finally, when you’re ready, we would be happy to discuss how Robles Bookkeeping can support your business. Click here, and let’s start that discussion with a free evaluation of your books to assess whether we’re the right fit for your needs.