As a business owner, you have a lot on your plate! The thought of handling your bookkeeping on top of everything else you have going on can be overwhelming. But with basic bookkeeping skills, you’ll be able to handle what you need to like a pro.
Of course, as you grow, and in certain situations, DIYing your bookkeeping isn’t the best idea. It really depends on where you’re at in your business and how you feel about it!
If you are going to handle your books yourself, it’s time to brush up on important basic bookkeeping steps. That way, all your ducks will be in a row and you’ll be ready to handle things—especially if numbers and finances are out of your comfort zone!
Wait—Should I DIY My Bookkeeping?
Before we dive in and get started, let’s talk about whether you should DIY your bookkeeping.
There are a few key situations where you definitely should consider handling basic bookkeeping on your own!
- Make $100,000 per year or less
- Don’t have enough room in your budget to pay a bookkeeper
- Are willing to learn about business finances (and implement what you learn)
- Have the patience to sit down and handle your books each month
…DIY bookkeeping is the right choice for you!
But if you know you won’t actually take the time to do your bookkeeping, learn what you need to know, or implement changes to your bookkeeping…it’s time to hire it out. If you absolutely hate working with numbers, that’s another reason to consider outsourcing!
And as your business grows, you’ll also want to consider outsourcing—things get more complicated as you grow!
Honestly, evaluating whether or not you’re ready to handle basic bookkeeping on your own starts with your money mindset. If your mindset isn’t where it needs to be, you need to make those shifts (or outsource your bookkeeping).
Why You Should Use QBO for Basic Bookkeeping (and Avoid Spreadsheets)
We’re going to talk about four basic bookkeeping steps you should take to get started handling your finances. But first, know that I recommend QuickBooks Online for basic bookkeeping—not spreadsheets.
If you’re anything like the entrepreneurs I know, you didn’t get into business to do bookkeeping! But entrepreneurs end up wearing a LOT of different hats in the early stages of growing their businesses…and the bookkeeper hat is one of them.
It really doesn’t make sense for business owners who are in the initial stages of growth to hire a bookkeeper. But you still need a bookkeeping solution that is easy to learn, quick, and can be implemented throughout the year!
This is why a lot of people turn to spreadsheets. Spreadsheets aren’t as intimidating as Quickbooks Online. People can create them exactly as they want, and they do the trick…for the most part.
I love spreadsheets, so let me be clear, I’m not knocking them. Here are 5 reasons why I’m a proponent of Quickbooks Online over a financial spreadsheet any day.
QBO Is More Accurate
QuickBooks Online is way more accurate than spreadsheets, especially when it comes to reconciliation.
Reconciliation is the process of comparing what’s in your accounting program with what’s on your bank statements. This process ensures, without a doubt, that you are accounting for ALL of your business transactions.
Spreadsheets don’t have this fail-safe, so oftentimes, transactions fall through the cracks! You won’t have to worry as much about missing transactions when you switch to QBO.
You’ll Avoid Mixing Personal and Business Income and Expenses
Spreadsheets make it easy to mix business and personal income and expenses in your bank accounts. The IRS hates when business owners do this (and so do bookkeepers).
If you only take one thing away from this blog post, let it be this. Separate your personal and business finances into different bank accounts and credit cards! Then, use QBO to make sure everything is where it needs to be.
QBO Saves Your Time
With QuickBooks Online, you can automate your bookkeeping…which saves you TONS of time.
When QBO is optimized for your specific business type (and you have bank rules set up), you can automate 90% of your bookkeeping. In fact, I’ve actually created a system so you can complete accurate month-end bookkeeping in 20 minutes or less. Beat that, spreadsheet.
You’ll Actually Save Money (Trust Me On This!)
Although this might sound counterintuitive, you’ll save money with QuickBooks Online over spreadsheets!
We all pay for a lot of subscriptions and look for spots to save, like spreadsheets—I get it. QBO Simple Start (my recommended plan to start with) is $25/mo. But as the CEO of your business, you need to consider what your time is worth!
What is your hourly rate, and do you spend less than $25 worth of your time each month on your spreadsheet? If you could automate 90% of your bookkeeping in QBO, would that be worth $25 per month?
Hint hint: QBO is going to save you money long-term, especially as your business grows and your basic bookkeeping becomes a little more complicated.
Spreadsheets Aren’t Scalable!
The other main reason spreadsheets are a bad idea? They aren’t scalable!
You will 100% grow out of your spreadsheets eventually. I’ve seen some intense spreadsheets—and despite all the formulas, they are not as efficient or effective as QBO. Not to mention, the IRS would much rather look at a QBO account than a spreadsheet.
Growth in your business is amazing, but it often comes quickly. More often than not, it feels like a scramble to keep up! The people who grow gracefully took the time to set up their systems first, starting with QuickBooks Online even for the most basic bookkeeping needs.
4 Basic Bookkeeping Steps You’ll Need To Take If You’re Going To DIY Your Accounting
Now you know why it’s such a good idea to use QuickBooks Online for your basic bookkeeping needs and as you grow. Here are four steps to take to handle your basic bookkeeping on your own!
1. Set Up Your Accounts and Make Sure You Understand Them
First, you’ll need to set up your accounts and understand how they work. Your chart of accounts really is the backbone of your business finances. You’ll be able to effortlessly map this out inside an accounting software like QuickBooks Online.
You can edit your accounts to reflect your business needs. You should know these accounts inside and out so that you can enter financial transactions the right way!
2. Record Every Transaction You Make Inside QBO
Now it’s time to start recording every transaction you make inside of QuickBooks Online! Each and every transaction you make has to be recorded.
Make time to handle this every week so that you don’t miss (or duplicate) transactions. This is super easy inside of QBO if you use bank feeds!
Related: How Effectively Allocating Money Helps You Achieve Your Goals (and Start Paying Yourself)
3. Reconcile Your Bank Accounts
Next, you’ll need to reconcile your bank accounts. With reconciliation, you cross-reference your monthly bank statements with the transactions you’ve entered in QBO. You’ll see any additional charges and fees, any outstanding checks, and double-check the transactions you’ve recorded.
When you reconcile your accounts, you’ll experience an accurate cash balance—and when your business is small, this is especially important! As a smaller business with limited cash flow, you need an accurate picture of what’s available and what’s happening.
You can actually link your bank accounts to your QBO account, which makes reconciliation quicker. This saves you valuable time when handling your basic bookkeeping!
4. Print Out Your Financial Statements
Finally, for your basic bookkeeping steps, you’ll need to close the month and print out your financial statements for your records. This is an automatic process inside of QBO that saves you tons of time.
You can select specific cut-off dates and times inside software like QuickBooks Online. Financial reporting is a super important part of the basic bookkeeping process. You’ll be able to understand the financial health of your business!
There are three basic statements you’ll have here:
- Profit & Loss: net income over a certain period of time
- Balance Sheet: business liabilities, assets, and equity on a specific date
- Cash-Flow Statement: incoming and outgoing cash during a particular period of time
You now have everything you need to handle basic bookkeeping on your own!
Remember, DIYing your bookkeeping isn’t right for everyone. But if you’re planning to do it yourself, QuickBooks Online is essential (and please—ditch the spreadsheets ASAP).