The A-B-C And 1-2-3 Of Accounting
Whenever I think about explaining accounting or business jargon, I always seem to think about that The Jackson 5 Song ‘ABC’
A-B-C, it's easy as 1-2-3…
Now, I’m not going to go through the whole alphabet today, but let’s get started on a few words that will get you started and headed in the right direction.
A - Accounts. When you start your business, you should open new bank accounts right away. Keeping your business finance organization separate from your personal finance is a life saver. If you’re a freelancer or sole proprietor, you know that your income is taxed at your personal rate.
If you’re a corporation, this is a requirement. Your corporation is a separate legal entity and needs its own bank account. I set mine up online and finalized in the branch all within a few days.
B - Bank Reconciliation. Reconciling your accounts regularly will ensure that you’re feeling organized and on top of things. The stress that accumulates from getting behind can be overwhelming (I know it!) but with the right processes and tools, it will take you no time!
C - Close the books. Way back in the day when bookkeeping and accounting was done by pen and paper, the books would be closed at the end of the period. Literally. Now, we just ‘close the books’ by locking the system and preventing any entries from being made before that point in time unless you have the password. So, we’re metaphorically closing the books.
It’s as easy as 1-2-3…
1 - Use accounting software to organize your business - everything should center around your accounting software. If you have an online store, it should integrate easily with your software. If it doesn’t, it should allow you to download a .CSV or .OFX so you can easily import the sales. Xero is the best software to organize your business.
2 - Use Hubdoc to organize your paperwork. I’ve always bought into the ‘a clear desk is a clear mind’ for my own workspace. I know that’s not the same for everyone, but it works for me. So, when I went paperless and then started using tools to go paperless with my clients, I knew that Hubdoc was the best choice. It automatically sorts your documents and it integrates with Xero and QBO so it’s the top option for your cloud-based organization. Don’t forget to shred the document once it’s uploaded.
3. Create habits. Life gets busy, you put things off. If you create habits of doing 5-10 minutes of any of the above each day, or simply taking a picture of your receipt and uploading to Hubdoc, you can stay ahead of accounting items. For my clients, we have gone from misplaced receipts 40% of the time to having nearly 99% of the receipts.
See, A-B-C, it's easy as 1 2 3…