10-Day #LoveYourBookkeeping Challenge

Join me in this amazing 10 Day Challenge and make 2015 the year you’ll #LoveYourBookkeeping!

This loving challenge will deliver you 10 days of bookkeeping information & resources. Each daily prompt only takes a few minutes of your attention, nothing more, nothing less.

I know it’s January the month to start fresh, the month we’re still a bit overwhelmed with new ideas to implement on our business and we feel a bit lost with all these goals and intentions we are juggling and trying to implement. After a few years in business I came to the conclusion that almost all online creative business owners forget or dread one of the most important parts of business – bookkeeping. And it’s also a known fact that a lot of people find it to be the most boring part of running a business.

Fear not, this is about to change and by the time this challenge is over, you will be prepared to embrace this new year and your business bookkeeping in a more caring and loving way.

And did you know that I’m offering all this for FREE!

We start February 2nd.

It’s really simple to join this loving challenge and there are four ways you can do that.

  1. Enter your name and email address in the following link.
  2. Like us on Facebook and get our notifications.
  3. Follow us on Twitter and tweet lovingly every day.
  4. Follow along on Instagram.

If you sign our newsletter I’ll also send you a welcome email for this unique challenge. Then every day – from February 2nd – February 13th you’ll be able to check our bite-sized #LoveYourBookkeeping Challenge spread all over all our social media accounts.

The more we share, the more we have. – Leonard Nimoy

So, if you can spread the word about the #LoveYourBookkeeping Challenge with your family, friends and online acquaintances!

Thank you so much for all your support!

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The new year is a great time to reflect and think on the year past. It’s also a good time to cast your eye to the future and think about where you want your business to be in a year’s time. What will your business look like? How will you get there?

To accomplish what you envision for yourself and your business, you can set specific business goals you want to achieve over the course of the new year. I plan on setting goals for my business and I highly recommend you do the same.

I started reviewing my past year, after closing out my business finances and answering the very important questions Blacksburg Belle sets out in her yearly review post. It has helped me see where I am, where I’ve been, and where I want to direct my business in 2015.

In answering these questions for my business, it has helped inform the following goals for 2015:

My Business Goals for 2015

  • Acquire five new clients
  • Finish two professional courses
  • Continue with my blogging and social media schedule

Over the years, I’ve learned that it is best to start small. I plan on accomplishing my goals in very specific ways. To acquire new clients, I plan on applying to jobs on sites like oDesk and do research online. I’ll do this at least once a week and follow up with any leads. My two other goals will also support the first. I also want to turn any contract work into invoicing clients.

To finish my professional courses, I need to work at it everyday. I need to read and do the work, continuously, until the course is finished. I will set aside one to two hours every night to for this work. I am currently working on an April completion for a course on Advanced Bookkeeping and then an August completion for Advanced Payroll. I keep myself up to date with the bookkeeping industry because it helps you, my clients. Read more about why I keep up with certifications and the industry.

Keeping a blogging and social media schedule is hard work, but I am lucky to have help in this area and plan to continue to rely on this help to keep me on track. I’m going to continue these relationships, and keep my blog and social media updated and current.

What about you? What what are your business goals for the year?

To get started, you can answer the same questions from the Blacksburg Belle to help inform your business goal setting for 2015. If you’re stuck with setting goals, here are some financial goals for you to consider:

  • Keep your books up to date – Whether that’s doing them on a weekly or monthly basis, get in the habit now.
  • Keep up to date with your invoicing – This will help you see how much money you’re taking in on a weekly basis. This is also helpful if keeping up with your bookkeeping is too much.
  • Save your money – Set aside five to 10 percent of your income. Put it in a tax free savings account and forget about it.
  • Hire a bookkeeper – Keeping up to date with your bookkeeping not for you? You can hire me, and help me get closer to achieving one of my business goals in 2015.

Do you plan on setting business goals? I’d love to hear about them in the comments.

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In the very the last post in the Wrap Up Series, we’re going to make sure all of your accounts balance. Once you know that, you can prepare your taxes, or send the files to an accountant who can prepare your taxes for you.

Before we start, make sure all of your expenses and invoices are entered. See the  Expenses, and Invoices blog posts and do that work before moving ahead. You will then need to have all of the bank reconciliations done and ensure that any missing transactions are added. To do that, see last week’s blog post for further information about reconciliation. Once you have all that complete, you can start your trial balance as you’ll need to reference the master spreadsheet to get these numbers.

Step 1: Write down all the accounts in order

Write down all the accounts in order of:

  1. Assets
  2. Expenses
  3. Liabilities
  4. Sales
  5. Equity

You should have these numbers from your totals throughout the year, as you’ve gone through and added your expenses, invoices and then reconciled your bank accounts. Take the totals of each account from the spreadsheet and add them in the proper column like in the example below, with debits on the left and credits on the right.

To make it easy, have the spreadsheet calculate Totals per month, and then a Grand Total for the Year. (Already done for Bookkeeping Spreadsheet)

There is a rule of thumb, if every account is positive, then the balances will go in the respective debit or credit column. Assets and Expenses are in normal/positive DEBIT balance and Revenues, Liabilities and Equity are in normal/positive CREDIT Balance.

Here is an example of a trial balance: Download to use and add rows as needed.

Trial_Balance

Once you have this done, you’ll use these numbers for your taxes, and if necessary, a Balance Sheet and Income Statement.

For Online Accounting Software

Trial Balances are all done automatically. Softwares are set up for double entry bookkeeping and makes the user enter amounts only once, unless there is a manual journal entry, but even then the system won’t let you save it until your Debits equal Credits.

For Xero: Go to Reports, then All Reports, then Detailed Reports and click on Trial Balance. You can publish the report, which means that the report is saved with those particular numbers and can be printed or exported.

For Wave: Go to Reports, then Trial Balance. You can also export this to Excel, CSV or PDF.

You have now successfully closed out your accounts for 2014! Congratulations. This means you are ready to start 2015 off right. You now know how to track your expenses and invoices and perhaps do them at least once a month to keep on top of them. But even if you leave it until the end of the year, you now know what you need to do to close out your books for the year. Thank you for following along!

 

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If you’ve been following along with the End of Year Wrap Up posts, you should be well on your way to logging your yearly expenses and invoices. Today we are going to cover the next step in closing out your books for the year. It involves reconciling your accounts and can be a tedious step. But stick with me as I walk you through it.

Sometimes it is easy to overlook reconciling your bank accounts, but it is important to do as it helps you get a clear idea of what your business is worth and how much liquid assets you have. You also need to document the little charges that show up in your bank account. You’ll also be checking to see if your accounts are correct and then adding in the little charges.

If you are using a spreadsheet, then the bank reconciliation process can be a long one. Just like entering your expenses and invoices, I recommend you do this step when you have an hour of stress-free time.

Step 1: Gather your bank statements

Again, starting from the end of the previous year, consult your December bank statement, then each bank statement for each subsequent month. This process includes paypal accounts and credit card accounts. Note: The ending balance of December 2013 should be identical to the beginning balance of January 1, 2014.

Step 2: Set up your spreadsheet

I’ve provided a sample spreadsheet and how you should set up the spreadsheet for bank reconciliation. Feel free to continue using the sample spreadsheet for this step. Add more rows if needed. Download to use!

Bank_Rec

Step 3: Enter in any bank fees or interest

Looking at your accounting books (if you’ve been keeping them throughout the year) or your expense/invoices on your spreadsheet, you’ll need to enter any bank service charges, insufficient fund, check fees or interest earned on your bank account. While these charges are easily seen on your bank statement, more than likely, they haven’t made it to your accounting system and this step adjusts for them.

Again, starting from January 1, deduct any bank service charges to your spreadsheet. A bank service charge are the fees banks charge for having a checking account, or fees for overdrawing your account, for example. Deduct any NSF checks, or checks that bounced and didn’t have sufficient funds. You also need to deduct any check printing charges. These occur when a company arranges for their bank to handle the ordering of its checks. The payment comes out automatically from the checking account. You then want to add any interest you may have earned on a cash balance in your account. You usually see this in a savings account, but you can also have earned interest on other accounts if that is a feature of your account type.

Once you have added these deductions and additions, you need to make the adjustment on your spreadsheet.

Balance per Books on December 31, 2013

Adjustments:

Deduct: Bank service charges

Deduct: NSF checks and fees

Deduct: Check printing charge

Add: Interest earned

Adjusted/Corrected Balance per Books

Quick Tip: Put it where it isn’t. If there are bank fees on the bank statement, but not recorded in your bookkeeping spreadsheet, adjust the book balance with a credit to cash (negative number in Bank Reconciliation spreadsheet).

Step 4: Enter any missing deposits in transit and outstanding checks

Starting with your balance per your bank statement on December 31, 2013 add your deposits in transit and deduct any outstanding checks.

A deposit in transit is money received and recorded by the company but not recorded by the bank. For example: you had a craft sale on December 31 and you documented the total sales of $300 in your company records. You then went to deposit the money at the bank after hours. That transaction will not be recorded on the bank statement until January 1 2014. The amount needs to accounted for by adding it to the correct month you conducted the sales.

Outstanding checks are checks written and recorded by the company, but have not yet cleared the bank. For example: you wrote out a check to your supplier for $150. This amount is recorded in your cash account of the company, but not on the bank statement, since the bank is closed until January 1 2014.

Once you add your deposits in transits and deduct any outstanding checks, record the adjustment to your book balance for January 2014.

Balance per Bank Statement on December 31, 2013

Adjustments:

Add: Deposits in transit

Deduct: Outstanding checks

Adjusted/Corrected Balance per Bank Statement

 Quick Tip: Put it where it isn’t. A deposited in transit was recorded in your bookkeeping spreadsheet, but not in the bank statement. Adjust the Bank Statement with a debit to cash (positive number in Bank Reconciliation spreadsheet).

Step 5: Bringing it all together

After adjusting the Balance per Books (Step 3) and Balance per Bank Statement (Step 4), the amounts should be equal.

Now that you have all of your adjustments, you need to enter them into your Bookkeeping Spreadsheet. Remember your Debit/Credit training? Additions are debited to your bank account and Deductions are credited.

How do you do this in an online accounting software?

With Wave: Bank rec is a new feature in Wave. To see if an account has the same balance as your statement, you must use the Filter by “Accounts” and all transactions for that account will fill the transaction screen. Then every verified transaction will have a “verified balance” and the top bar will show the Difference between the Online Statement and Verified Balance. A difference of Zero (0) means that you are reconciled.

With Xero: Within every Bank account, there is a Reconcile Tab. Every transaction needs to be matched with an invoice or expense, or marked as spend money/received money. Once the transactions are reconciled, “Statement Balance” and “Balance in Xero” will match. However, this system is not foolproof, and you still must compare your bank statement. If these balances don’t match, it may be because the auto sync missed some transactions and you’ll have to manually upload a statement with the missing lines.

Congratulations! You’re almost done with closing out your business accounts for the year. There’s actually one more step that needs to be done, so stay tuned next week for one final end of year wrap up how-to.

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Continuing along with our series on getting your business finances in order for the new year, today we’re going to talk about invoices. Let’s dive right in.

When you take in money as a business, you may not necessarily record the transaction as an invoice, but it’s helpful to think about it in that way. Whenever you receive money you need to record it. Even if you don’t have an accounting program or software, you need to mark it down and have some type of receipt of payment. For example, if you use a Square reader, this sends a receipt of payment and captures the information about that sale. And while you have this information within Square, you still need to organize and document every last penny you have received throughout the year.

Step 1: Gather your invoices

This should include anytime you received income throughout the year. Again, let’s start at the beginning of the year and take it one month at a time.

Step 2: Set up your spreadsheet

Since you may not have an accounting program or software set up, I’m going to show you how to do this manually, within an Excel spreadsheet.

Using the same spreadsheet I introduced in the Expenses post, fill in the fields under the Income columns. Please download to use, and add rows if needed.

Sample_BookkeepingSpreadsheet

Step 3: Enter your invoices

Starting with your first sale from the year, enter the information needed to the  columns of the spreadsheet.

  • Date – Enter the date of the sale, when the purchase occurred.

  • Description – Enter what it is that was sold.

  • Reference – Enter your own invoice number here. If you haven’t numbered your orders or sales, you can start by saying your first sale of the year is 001 and continue on down the line. You want to do this with all of your orders whether it is from Etsy, Big Cartel, so on and so forth.

  • Bank Account, Debit or Credit – Here you want to record the debit to your bank account (money in).

  • Sales – You may want to split this column out for the different sources of income. You may want to have a column for your Etsy sales, consulting sales, BigCartel or in person, craft fair sales.  This can help you see where your most volume of sales are from and where the most money is made. This is great information to have for tracking purposes and to help grow your business.

  • Tax – Did you charge tax and how much did you collect?

    • In Canada you should be collecting GST if you have over 30,000 gross revenue.

    • In the U.S. you should be collecting Sales tax in the state you are located when doing in person sales. Online you only need to collect sales tax if you sell to a person who resides in a state where you have a physical location.

Once you’ve filled out these columns for your first invoice you need to repeat the process for all of your income from the fiscal year until all of your invoices are accounted for. Everything from the year goes into the same spreadsheet. Take it slow and go one month at a time.

But what about online systems? How do you enter your invoices?

The good news is, if you want to set up an accounting system or start using accounting software, you can still do so. You may have started this last week with your expenses, so you should be able to piggyback off of what you’ve already entered and continue by entering your invoices.

For an online system like Xero:

Xero has an invoice template which makes it easy to import all of those sales you wrote up in a spreadsheet. It’s a little more work, because each invoice needs to be matched with a payment and reconciled with the corresponding bank transaction. You can make invoices for cash sales, and match the payments to your petty cash account.

For an online system like Wave:

Unfortunately, you can only create invoices within Wave and not import them from a spreadsheet. Once made, you can match a transaction to the invoice with the “create invoice payment” function.

For an online system like Freshbooks:

Another easy to use software is Freshbooks, but it’s something to set up for next year. Freshbooks is great for businesses who really don’t want a fully functional accounting system, but who need to get paid easily. What’s a neat feature is Freshbooks capability to send recurring payments. Set up a profile and see the money come in automatically!

Once all your invoices are in for the year, congratulate yourself on a job well done. You’re almost done closing out your books for the year!

Join in next week, as I’ll go over another step in the process and show you how to reconcile your accounts.

Missed the previous posts? Get them here:

Introduction

Expenses

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Last week, I introduced this series on how to wrap up your finances at the end of the year. I talked about the importance of closing out and reconciling your business accounts for the start of the new fiscal year and why you need to do so.

In this post, I’ll be discussing step by step how to document your expenses from the current fiscal year and how to prepare them for the end of year wrap up. Let’s get started.

Step 1: Gather your expenses

Gather your expenses from this current fiscal year. We’ll be starting at the beginning of the year with your expenses from January.

Step 2: Set up your spreadsheet

Since not everyone has accounting software or perhaps has not kept up to date with their software throughout the year, I’m going to show you how to do this by hand, or at least in an Excel spreadsheet.

I’ve made a sample spreadsheet for you to use and customize for your expenses: Please download to use!

Sample_BookkeepingSpreadsheet

Step 3: Enter your expenses

Take a receipt and fill in the columns with the information from the receipt, fill out all the columns:

  • Date – Enter the date of the receipt, when the purchase occurred.

  • Description – Enter the name of the company you purchased from. For example if you purchased Facebook ads, you’ll record “Facebook.”

  • Reference – Here you want to record a purchase order number or invoice number that the receipt references. If you don’t have one, it is ok to leave this field blank.

  • Source –  For this field, you want to record where the the money came out of. Was it your bank account, checkbook, paypal, etc?

You should have a reference or a source per expense. You don’t need both, but you do need one or the other.

  • Bank Account, Debit or Credit – Here you want to record the amount of money that was debited from your bank account and/or credited. I explain the different between these two options in my two previous posts What The Heck Is A Debit Anyway? and Credit- Love It Or Hate It

  • Categories – Here you want to record the amount to the type of expense. Was it advertising, shipping, bank fees? There are many expense categories to choose from. (the bank account dr/cr should be identical to this amount)

  • GST Paid – Here you want to enter the tax you paid on your expense. In Canada there are two taxes, so you may want to have two columns one for GST and one for Provincial tax. In the U.S. you can record the sales tax you paid on the expense, if any. (be careful- don’t include tax in your corresponding Expense Category!)

Once you’ve filled out these columns for the first expense you need to repeat the process for all of your receipts from the fiscal year until all of your receipts are accounted for. Everything from the year goes into the same spreadsheet. Take it slow and go one month at a time.

But what about online systems? How do you enter expenses?

The good news is, if you want to set up an accounting system or start using accounting software, you can still do so.

For an online system like  Xero:

  • Create an account with Receipt Bank and send all of your receipts virtually. Most of our receipts these days come into our email and Receipt Bank allows you to forward your receipts to a unique email just for you. You can even take a picture of your receipt, if you have one from a cash purchase, with an APP (available on both Apple and Android) and it will send it to your account automatically.
  • Receipt Bank takes care of scanning the receipt and gets it ready to publish to Xero. Once you’ve checked your receipts for accuracy and they are set to the right expense account, you can set the program to automatically send receipts to xero. It will even allow you to export your expenses as an Excel Spreadsheet or to PDF.

 For an online system like Wave:

  •  Shoeboxed is another system that takes care of receipts. It will scan your receipts and get them ready for export into Wave. With a click of a few buttons, you can watch all of your receipts turn into transactions inside Wave. It will even allow you to export your expenses as an Excel Spreadsheet, CSV, or PDF.

Once all your expenses are in for the year pat yourself on the back and treat yourself to a glass of wine because that is a lot of work! And now that you know how to record your expenses, maybe next year you’ll do it year round so you won’t have to do it all in one go.

Join in next week, as I’ll go over how to enter your invoices from the year. So come prepared with at least your first three months of invoices.

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This is the first in a series where I talk with small business owners and their experience with professional bookkeeping services to get to the bottom of why professional bookkeeping is best for small businesses. In this first edition of Professional Bookkeeping and Small Businesses, I talk with Tracy James with A to Z Motorcycles.

A to Z Motorcycles is an online retailer that sells a variety of artwork based on classic and modern motorbikes. They offer a range of art prints, posters, canvases, gift cards and t-shirts all sporting their original designs. They started in January of this year and officially became a company in April, 2014.

Tracy started out using Xero for A to Z Motorcycle’s bookkeeping needs. She knew it was important to keep track of their incoming and outgoing money as well as inventory. “I was making sure I kept all my records electronically and photographed any receipts that weren’t already digital,” she said. But not long after, she realized that because she was not a trained bookkeeper, or accountant, there were things she wasn’t able to do. The accounting became even more cumbersome when they started dealing with multiple currencies via PayPal.

Tracy would spend hours each week on A to Z Motorcycle’s bookkeeping, but kept falling behind. She finally made the move to hire a professional bookkeeper (specifically Crafty Bookkeeping) to help free up her time to concentrate on other aspects of the business such as marketing, promotion and sales. She wanted to spend her time focused on making money rather than just keep track of it. It became too complex and too stressful. Tracy explained, “ I needed to make sure we were correctly reporting our money in and out so we didn’t get into trouble with the tax department. We had shareholders that invested in our startup so I needed to make sure all our reporting was accurate for their benefit too.”

After hiring Crafty Bookkeeping, Tracy had more time to focus on things within the business she was good at. “Having a bookkeeper frees up my time to focus on my strengths in running the company and developing new products. Plus it allows me to be confident that we are complying with tax requirements.”

Having a professional bookkeeper has allowed Tracy to relax and have confidence that the money side of things are taken care of. When the books are in order, she is also able to have a clear picture of how A to Z Motorcycle is doing financially and she is able to make better business decisions. “It makes my company more efficient,” she said.

Tracy has been so happy with her experience with professional bookkeeping she has even recommended Crafty Bookkeeping to other small businesses. “Trying to do it yourself is just a false economy and way too stressful. Plus you are almost certain to make mistakes.”

Thanks Tracy!

Are you a small business that has benefited from professional bookkeeping? I’d love to hear from you! Tell me your story and you may be featured in this new and on going series!

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I just completed a refresher bookkeeping course made available via the Institute of Professional Bookkeepers of Canada (IBPC.) As a member of IBPC I am able to take advantage of these opportunities to keep up to date with the bookkeeping profession.

I chose to do the refresher bookkeeping course because standards can change over time. I originally did a Computerized Accounting course in 2008 and on taking this Basic Bookkeeping for Small Business course, I was happy to see that I came out with a %94 average. While things haven’t drastically changed within bookkeeping since the first time I took the course, I am ready for any future changes as the needs of small businesses continue to grow.

What I loved about this course is that it taught the manual labour of bookkeeping. This means not using a computer program and manually keeping track of purchases and expenses in an accounting book. The course covered this really well as well as tricks and tips on how to catch and fix easy to make transposition mistakes. The main idea behind the course is you take an example business, who starts with manual recordings, and take them to full accrual financial statements. What that means is, I learned how to take someone who only tracks their cash transactions and have their bookkeeping cleaned up and ready for tax time.

I hope to soon start another course on my way to obtaining my Distinguished Financial Advisor (DFA) designation. This designation by the Knowledge Bureau will certify me as a professional bookkeeper and will take several years to accomplish. Think of it somewhat as getting a Certified Professional Accountant (CPA) designation for Accountants, but it isn’t exactly apples to apples. It will mean that I have the seal of approval of the Knowledge Bureau and be a part of a growing network of professional bookkeepers.

The next course will be Advanced Bookkeeping for Multiple Business. It will be an in depth look at how a bookkeeper uses Quickbooks or Sage. It will cover how a bookkeeper can use these programs to produce financial reports, among other tasks such as looking at keeping finances for several different types of businesses as each type of business needs its own set of accounts.

I hope to translate what I learn from this next course to use them with online accounting systems and programs such as Wave or Xero. While it’s good to know how to navigate Quickbooks or Sage, it will be even more crucial to understand how to use the latest accounting software that small businesses are adopting every day. With every course I take on my way to obtaining my DFA, I will adapt the lessons I learn to be of the most benefit to my clients.

Who should care about my professional development? YOU. The client. Anybody can say they are a bookkeeper, but not everybody will want to spend the money on training to be a better or certified bookkeeper. Being a bookkeeper means I get to help a variety of businesses and getting trained in their businesses means I can help them more efficiently, which is something I strive for every day.

What about you? How do you keep up to date with your professional development? How do you keep on top of your profession?

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