Bookkeeping doesn’t have to be painful, even if you do it yourself. We use these 5 tips to speed up our bookkeeping work, and now you can save time too.
1. Separate bank accounts for business and personal
If you have business and personal transactions in the same bank account, you (or your bookkeeper) will need to spend extra time thinking about each transaction.
Open a separate bank account for your business transactions, set up a bank feed in Xero, and your bookkeeping will be faster and more accurate.
As the balance in your business account grows or shrinks, you will have a rough idea of how well your business is doing. Your bookkeeping will still provide a more accurate assessment of the health of your business, of course.
The separate bank account may also help with spending control. If the money is in a business account, it can help you resist the urge to spend it.
It can be helpful to take this a step further and open up another account for business savings. This will help you see if you are saving enough for the next big supplier bill or tax payment.If your money is in a business account, it can help you resist the urge to spend it. Click To Tweet
- Change your invoices and statements, so that customers know to pay using your new account.
- Notify suppliers who automatically take payment from your old account.
- Directly contact your suppliers or customers, if they keep using the old account. Stay on the phone with them until they make the change in their system.
- An easier alternative: consider using the old account for business and opening a new account for personal use.
2. Go paperless: processing and storing bookkeeping paperwork
For every transaction, there is usually a piece of paper that needs to be kept in case of an audit. Increasingly, that piece of paper is available online or via email instead, but not all of them.
Traditionally, those pieces of paper were kept in a shoebox, bags, envelopes or folders. Now there are electronic options, recognised by an increasing number of tax regulators around the world. For example, the Australian Taxation Office recognises electronic records, and requires any records to be kept for either 2 or 5 years.
First, you can scan a copy and email it to Xero. The file can then be attached to a transaction in Xero for easy retrieval in case of an audit.
There are also services that will look at the scanned and extract the date, amount and assign an expense account. The services can also scan the original paperwork, or use a photo that you’ve taken on your mobile phone. Shoeboxed and ReceiptBank are two of our favourites, and they both integrate with Xero.
The best option is to become paperless, avoid cash transactions, and have all of your electronic transactions go through the accounts that feed into Xero. This way, you can minimise time spent opening, reading and filing paperwork, and finish your bookkeeping faster.The ATO recognises electronic records & requires any records to be kept for either 2 or 5 years. Click To Tweet
3. Reconcile frequently
It is very easy to reconcile bank accounts in Xero, but you don’t need to do it every day. Batching a task is a good way to get it done faster, so you could let your transactions build up in Xero.
However, it needs to be done eventually. What is the maximum amount of time you can leave reconciliations?
The traditional answer is to do it before preparing financial statements or tax forms. This could be only once per year, depending on the particular form, but I recommend more often:
- Before following up debts with customers, to check if the customer has paid recently.
- Before paying suppliers, to make sure that you haven’t already paid the bills.
Some businesses prepare bank reconciliations daily, which can enable faster action. Your customer called to ask on the status of a job? That’s a great time to talk to them about their overdue payments, after a quick check in Xero.
Another reason to reconcile frequently is to reduce the risk of fraud. If you have delegated the task of making payments, or banking cash received, there is a small risk of fraud. Keeping your bookkeeping records up to date and preparing regular bank reconciliations are a good way to highlight fraudulent behaviour.
More frequent reconciliations cost time and money, so the best frequency depends on your business. Your bookkeeper or accountant can help with the decision.Bookkeeping tip: One reason to reconcile frequently is to reduce the risk of fraud. Click To Tweet
4. Ignore the Sales and Purchases modules in Xero
The Sales and Purchases modules are good for larger businesses that extend credit to their customers and/or purchase from suppliers on credit. They are also useful for easily sending and tracking quotes, invoices, statements and purchase orders. However, they may not be necessary for smaller businesses.
You don’t need to use the Xero Sales module if:
- Your customers pay when the sale is made, e.g. retail shops.
- Another service sends the invoice for you, e.g. shopping cart software for an online retailer.
- You use a different service or process to send invoices and track their payment, e.g. a notebook.
Now on to the Purchases side. Keep paper or electronic records of your bills outside Xero and use those to make payments. Then allocate the payments as they appear in your bank reconciliation. No need to enter the bills into the Purchases module!
5. Hire a professional
Don’t do your bookkeeping? Use a professional, because you’re wasting your time and talent doing the bookkeeping. Here’s why:
- The time that you spend bookkeeping could be better spent getting more customers. Or living your life!
- The mental effort you spend on bookkeeping could be better spent the same way. Or on new marketing initiatives, new products, new businesses.
- There are tasks that only the business owner can do, and bookkeeping isn’t one of those.
- Bookkeepers and accountants have the training and experience to be much more efficient.
You don’t have to sign up with us, but it helps!The time that you spend bookkeeping could be better spent getting more customers. Click To Tweet
Or maybe just get some support occasionally
We know that there are lots of people who still prefer to do the bookkeeping themselves. You might be able to handle most of the day-to-day bookkeeping work, but need help when something tricky comes up.
It can help to contact a professional in these circumstances, which is why we offer consultations.
Want some more tips to make your bookkeeping easier? There are some more we can share, so let us know in the comments, or contact us.