Top 3 Bookkeeping Tips for Small Business Owners
BOOKKEEPer JUSTINE LACKEY SHARES HER BEST ADVICE
Justine Lackey stopped by the Upleveler Show to share some bookkeeping tips for small business owners and I’m thrilled to be sharing them with you here!
Justine is an self-proclaimed accidental entrepreneur. She shifted into bookkeeping after leaving a tough job, thanks to a job opportunity from a friend. Now, she’s a bookkeeper for small businesses.
Justine has grown her team from a one woman show to a team of 10, helping behind-the-scenes with many different types of businesses. Today, she’s sharing her top bookkeeping tips with us.
T: Truth is, I think we all need a good bookkeeper in our lives. As small business owners, we often think we can handle it all, but as creative business owners, sometimes the money side of things isn't our strong suit. I’ve certainly got my own horror stories I’ve shared over the years! So I’m excited to give our readers some tips from a bona fide bookkeeper for small business owners. Let’s dive in.
Tracking finances isn’t a once a year task (unfortunately!). What can we do throughout the year to make bookkeeping easier?
J: Definitely! Knowing and understanding your finances happens over time. There’s something I like to refer to as the “consistency principle.” Really, what good bookkeeping comes down to is being consistent. It’s all about muscle memory and learning your software and habits, and keeping up with them! The more you’re in your accounting system, the better you get at it. Simple as that!
Some weekly tasks you should be doing is generating invoices. Cashflow is the lifeblood of your business and unless you’re invoicing on time and following up on those payments, you’re not feeding your business what it needs to be nourished, which is money.
Monthly, you should reviewing your financial reports and checking to make sure all of your payments have been made. I’m a really, really, big believer in financial boundaries. When you sign on a new client, how you behave with them in relation to your bookkeeping sets the tone for your entire relationship.
T: That’s so true! That’s a great tip.
J: Yeah, if you send out your first invoice late and you don’t follow up when it’s past due, you’ve now given your client permission to pay you late. Client relations are assets and a form of currency, so you want to nurture them, but you also want to be professional. Quarterly, you should be staying up to date with your estimated tax payments. It happens a lot that business owners get side swiped by the taxes because they weren’t prepared. The easiest way to make sure you’re paying your taxes is to reserve a percentage of each of your payments. Squirrel it away in another account so that you know it’s safe and ready to go!
Pro Tip: Add the estimated tax amounts you’ll owe and the due dates for your quarterly tax payments to your calendar. And if you’re doing it electronically, add a reminder 24 hours before they’re due so you can’t forget! You can pay them online, so there’s no excuses, and not paying will cost you more on April 15th.
T: We’ll dive deeper in a minute about how a CPA or bookkeeper can help you with determining those quarterly numbers if you’re not sure where to start. What else should be on our radar when it comes to taking care of our bookkeeping throughout the year?
J: I’m a big believer in tying up loose ends. If something is hanging out in your books or software and you don’t know what to do with it, now is the time to call in an expert. Call your bookkeeper or your BFF who is an accountant. Quarterly tax time is a great time to spot trends and tie up loose ends. And if you have paid any sub contractors more than $600 throughout the year, you are responsible for issuing a 1099 form (now called the 1099 NEC) and they are due by January 31st, as are W2s and W3s if you have employees. Finally, the last thing is to make sure you make your retirement contribution and get a folder together for your tax prep. Really, it’s about doing anything you can to make your life easier at tax time!
T: Okay, so what if I’m thinking to myself, this all sounds great… but what if I just outsource it? I’m not great at numbers and I’m not sure I’m ready to develop muscle memory. Can you give some tips about what you should look for in a bookkeeper?
J: So, I think the first thing we should do is qualify what the difference is between a bookkeeper and an accountant. I use an Army analogy: the bookkeepers are the ground troops, implementing the financial strategy. The accountants are like the Generals - they’re ones coming up with the global plan.
T: That’s a great analogy!
J: Bookkeepers are the ones adding up 2 + 2 and determining that you spent $4 on office supplies this year. Accountants are the ones deciding where that goes on your tax returns and what it really means for you. Your bookkeeper will be the one doing the day-to-day maintenance!
When you’re looking for a bookkeeper, accountant, or financial advisor… money is like medicine. It’s a good idea to work with people you’re referred to. There’s accountants and bookkeepers who work in specific industries, like construction, real estate, creative businesses. Look for someone who’s certified on whatever platform you’re working with (like a QuickBooksPro Advisor!).
When you’re looking for an accountant, I do believe it’s important to work with someone who’s in your state (or surrounding) because each state’s tax law is different. An accountant in Louisiana probably won’t know the laws for New York! Many accountants and tax professionals have relationships with people in their state departments, too, which can come in handy! I would just caution people to find accountants who are local.
Bookkeepers don’t need to be local because they’re not generally preparing tax returns and dealing with the laws. Their main function is to get all of the transactions into the right bucket and reconcile those items. That’s actually a great tip - you want to ask them if they’re reconciling your accounts. It’s a process of making sure that your software or spreadsheet reconciles to what your bank and credit card statements say. For example, if your bank account says you made $15K in January but your software says you made $25K, there’s something wrong. And that’s fixed by reconciling the accounts. Definitely an interview question - make sure you ask how often they’re reconciling your accounts. By the way, the answer is monthly!
T: That makes a lot of sense! So we’ve talked about the difference between a bookkeeper, accountant and we mentioned financial advisors. Is there anything else we should know about finding these team members?
J: Yeah! I call it my “financial trifecta.” In a perfect world, you’d have a bookkeeper, accountant, financial advisor. I believe in doing one thing and doing it really well. Accountants don’t do what financial advisors do and advisors don’t do bookkeeping… So, in a perfect world, all three of these team members would monitor each other and help create a system of checks and balances.
T: That’s really smart!
Q: Let’s talk about quarterly taxes a little bit more!
Quarterly payments are due each quarter of the year. The dates are a little funky! Dates for your payments are as follows: Q1 are due 4/15, Q2 are due on 7/15, Q3 is 9/15 and Q4 are due on 1/15. We actually send out big reminders from It’s Just Good Cents for the federal quarterly payment due dates. We can’t send them out for states because it does vary between the states but … often, state deadlines mimic the federal, but it can vary. So check on those, too!
T: I’ll chime in here with a tip! I actually put the due dates on my calendar with the amounts I’ll owe. I add a 24 hour reminder so when it pops up on my calendar, I know what I owe and I don’t forget.
J: Yes! And you can pay them online, so it makes it even easier! The IRS website does “close” at certain times, so don’t wait until the last minute the night before.
T: Wait, a website that closes?! That’s hilarious to me. Go pay those quarterly taxes now, ladies!! (originally interview took place on Jan. 15.) Is there anything else that you want to share about good bookkeeping?
In the end, good bookkeeping comes down to good habits. Take care of yourself and your financials so that you can live a less stressful life. I get it - it’s not fun, it’s not sexy… but knowledge is power. And while we understand it can get complicated, try to focus on the fundamentals, which are easy to understand. If you recognize early on that this is something you aren’t going to do, you owe it to yourself to outsource your finances and avoid mistakes.
Bonus Upleveler Tip:
Your homework right now is to add a money date on your calendar to look at your finances. Set aside time to review your numbers, check your accounts, download those receipts for your tax folder, and know what’s going on financially! And remember our pro tip from earlier?
Make sure that you add the due dates for your quarterly taxes on your calendar, too - you can include the amount you owe so you don’t forget and have to go back digging for those records.
If you want to connect with Justine, you can find her here!
Want more small business tips to help you grow and scale? TUNE IN to my podcast, This or More. New episodes to help you grow every Tuesday.
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