Regularly people complain to me about the time that bookkeeping takes and that it’s taking so much time from their actual work they are passionate about. When I ask this person if she takes one hour every week to reconcile her receipts, I mostly get the following response “well, no – it is easier to let it pile for a few weeks.”
Let’s get this myth out of the way that letting receipts pile up makes it easier to handle bookkeeping. It doesn’t and here’s why. You need more time to sort out the receipts once per month than you would every week. You are more inclined to have misplaced or forgotten to pay bills if you check it only once per month instead of weekly. And do you really want to invoice your clients on a monthly basis or every time a project is finished?
Here’s how you can keep your weekly bookkeeping effective and minimal in time.
1. Connect your bank account
It’s best to use software you’re comfortable with, such as the easy Wave or Freshbooks. The benefit is you can create invoices within a few minutes and you can connect your back account. This simple connection is a huge time saver because you don’t need to look all transactions up and import them. It’s done for you; all you need to do is to verify the relevant transactions.
If this is a big step for you and you want to stay closer to software you are already familiar with, use Excel. I do recommend you make a backup so you won’t lose any data in unfortunate circumstances of your laptop crashing. (Online applications are automatically backed up – as long as you have an internet connection, you will have access to your data.)
2. Input your bills
All bills you receive that are related to your business (including memberships for magazines and for your home office) can now be placed in the software. Make sure you note down how you paid for all bills, with your business account or your personal account. If it is with you personal account, the bookkeeping term is “personal investment”.
3. Invoice clients
This is the fun part of bookkeeping! Take your notes of what you plan to do or have done (depending on whether you bill before the project starts or after the project finishes) and make sure all invoices have a unique number and the correct client name to trace it back. (Yes, I know that sounds funny, but mistakes do happen to all humans!)
Pay attention to the payment date (most invoices have to be paid within 7 days, 15 days or 1 month). If you use an online application, the payment dates will automatically give you a pop-up so you know at all times what you can expect to receive in the next month(s). For Excel-users, it helps to highlight the cell in a colour for easy tracking.
I recommend you keep all invoices in PDF and send them by email to your clients for easy reference.
4. Don’t forget your quotes
Another important feature of your weekly bookkeeping is making estimates (aka quotes) for your prospects as a means to guide the discussion around pricing. It’s not pushy it is providing clarity.
It also gives you the opportunity to show your free goodies you want to throw into the deal and get recognition for them without bragging about it. As with invoices, use unique tracking numbers. You don’t want people to say “yes” to a quote that is one-year old with old prices and services so give prospects a validity period on your estimate. This is usually between one to three months.
5. Browse through receipts
And now comes the time-consuming piece: browse your receipts to write them off. Luckily, you only have seven days to cover this time! Receipts you can use to write off expenses include coffees at networking meetings, lunch meetings with clients, materials bought for your home office, gas or transit receipts (keep the transfers for your records).
6. It’s in the details
For all data you put into your bookkeeping system, make sure to note the following details:
• Vendor or client’s name
• Source (cash, credit card or debit card; you never know when you may need this information)
• Account (personal or business account)
• Type of income (if you have several sources, be specific e.g. consulting, speakers fee, memberships)
• HST (on bills, invoices, receipts; this is useful to know for paying taxes)
This sounds like a lot of information, yet it is useful to have in case CRA or your (future) bookkeeper or accountant needs it. It is also good to recognize that, as with everything, it takes more time the first time around. Next week, you will be much faster!
7. Check your bottom line
So with all this work done (congratulations!), reward yourself with understanding your finances. Look at the following information from the past week (and month) to base business decisions on:
a) How much did you spent on bills?
b) How much did you spent on networking and other marketing related costs?
c) What was your income?
d) What is your expected income (quotes and outstanding payments)?
e) What do you notice about your expenses? Are they high or low? Why is that?
f) What services are more popular than others when you look at your income?