We’ve all been there. When we’ve gone weeks, maybe months, without organizing our bank transactions and receipts. It can be overwhelming to think of the backlog that needs to get taken care of.
I wish I could say that there was a quick fix to this situation, but there isn’t. If you’ve fallen behind in your bookkeeping and want it cleaned up correctly, you will have to put some time and effort into it.
Why is having up-to date books important? Usually the first thing we think about is taxes, which is important. The cleaner your bookkeeping is, the easier and more accurate your tax filing will be.
But, we also want to keep track of how much we’ve invested in our business and if we’re actually making a profit. Too often I speak to entrepreneurs who are super excited about breaking through six-figures, but then have no idea how much they’ve actually spent on their business. Remember…
It’s not what you make, it’s what you keep if you want to run a successful business.
This page will walk you through the exact steps you need to take in order to get your bookkeeping up to date. If you’ve already started using a bookkeeping program, begin with Step #5.
Choose a bookkeeping program. Some of my favorite programs are Xero, Quickbooks, Kashoo and Freshbooks.
Set up the program. Follow the program’s instructions on how to get set up. The key step is to link your related bank and credit cards.
Make sure all of your transactions are included. Depending on the program you choose, when you link your bank info, it may allow you to backdate to the first day of your business transactions. If not, you will need to obtain the CSV file from your bank and upload the transactions manually.
Set up your chart of accounts. These are your categories (aka “buckets”) where you’ll place different transactions.
Reconcile your transactions. Depending on how many transactions you have in the backlog, I would start with the oldest and work forward. Why? Because the further away the date is, the harder it will be to remember it.
Divide the transactions into week-long chunks. Do not try to reconcile them all in one sitting. For example, if you are three months or 12 weeks behind, plan to complete everything over the course of 4-8 weeks. Each week you’ll reconcile 1 or 2 week’s worth of old transactions.
Reconcile the old transactions with the ongoing transactions. As you're catching up on older transactions, you are also doing the bookkeeping for the present. In this case, if you have 12 weeks to catch up on and do 2 weeks of old transactions and the current week (a total of 3 weeks), within a month and a half you’ll be all caught up!
It’s okay if you’ve fallen behind in your bookkeeping. The past is the past. Now, it’s time to take action, get caught up and establish habits so that it never happens again.
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