Article by Evan
An entrepreneur needs to learn to simplify bookkeeping because your books are a lot like an algebra problem, at first glance it’s a mess but often all you need to do is simplify.
Luckily for you, that’s what we want to cover in this article. Simplifying your books can be deceptively simple and believe us, it pays off in the long run.
Table of Contents
Best Way to Simplify Bookkeeping: Outsource
Off the bat we want to make clear that from our own experience running ecommerce businesses, outsourcing is the best way to simplify bookkeeping… especially for a small business owner.
Look – bookkeeping requires daily or weekly work, time that is better off growing your business.
That’s without taking into account whether you need to learn bookkeeping or not. Founders who try to do their own books without knowing what they’re doing are setting themselves up for a world of headaches down the line (think very messy audits).
Now if you need to learn how to keep your books, that’s additional time away from your business. Realistically, there are better skills for a founder to learn at the early stages that can boost your company: sales, marketing, strategy…
That’s why we think outsourcing is the best way to simplify bookkeeping. You’re winning both ways here: When you outsource to a bookkeeper in your niche, it lifts an enormous commitment off your shoulders and you get access to their knowledge and experience.
Next, you also save on resources with this option. Imagine all the additional costs associated with hiring an in-house bookkeeper just to do your books. Not to mention all the delegation and management headaches that come along with it!
Outsourcing to a professional ecommerce bookkeeping service completely does away with that. You’ll have access to a bookkeeper who fits your flexible needs and already knows how to work completely independently.
Why would you choose anything else?
Click Here to See Which Ecommerce Bookkeeping Service Package You Need
Keep Your Business Finances Organized to Keep Bookkeeping Simple
Now that we’ve got our biggest tip out of the way – there are a few things you as a founder can do to have a tangible effect on simplifying your bookkeeping.
What it really boils down to is organization. Good bookkeeping requires basic organization.
Separate Bank Accounts for Business and Personal Will greatly Simplify Bookkeeping
You’d be shocked how many founders push this seemingly meaningless difference to the side, only to wish they’d have done it earlier.
Your business may feel like it’s your life, but the income and expenses for your business and personal life are two very different things. Mix them up at your own peril.
Combining personal and business financials means not only having to sift through them in your account when you need to find a specific transaction, but it can also give you a warped view of your own financial situation.
This can lead to making financial decisions on incorrect information. Which can then lead to some very bad outcomes that you would most likely want to avoid.
All in all, not separating your accounts adds unnecessary time and complexity to your workflow – something easily fixed by just getting separate accounts.
Simply Bookkeeping by using a Single Payment Processor
When you are just starting out and making that big push to customers, the usual line of thinking is this:
“I want to capture as many customers as possible, so I’ll have as many different payment solutions available. That way, I won’t miss a single customer due to not having his preferred solution!”
It sounds logical and the customer is always right, right?
We haven’t found any proof that providing customers with two or more payment options increases sales. — in fact it might have the opposite effect! It just creates another unnecessary additional step between the customer paying for what they want, and sales tend to split between the two payment methods rather than increase.
This line of thinking also ignores the second order effect of this decision: payment reconciliation.
If you have payments coming from numerous different channels, you’ll have to reconcile them all separately in order to reconcile. This can quickly multiply the time and effort needed to accommodate everything. Not to mention, you are exponentially increasing your chance of making a mistake along the way.
Set a Simple Bookkeeping Business Process
A lot of new business owners are tempted to wing it. We don’t really recommend that.
You’d be much better off creating and following a business process for filing receipts, invoices and such into your bookkeeping system.
You don’t have to waste time thinking about what you should do with a file, or where it should go. Those precious minutes add up and take away from your focus (think Mark Zuckerberg only owning one identical outfit, but just less extreme).
Then, you also reduce the chance for losing or misplacing something. Think losing your keys is frustrating? Try losing a receipt that you need come tax time.
Finally, we live in the age of automation. This comes back to the first point of saving yourself time and effort with anything that can be further simplified. How do you automate bookkeeping processes? Well that leads us to our next tip.
Simplify Bookkeeping Through Software
It goes without saying that we’re no longer in the stone age and that you definitely want to leverage all the benefits of technology. That includes with your bookkeeping.
There is a large market for high quality bookkeeping software, such as Quickbooks Online, that offer an entire suite for businesses of all sizes to organise themselves.
You can link your business bank account or payment processor to your software of choice to have all of your business’s financial information in one place. Many of these pieces of software also offer analytics to give you a 360 degree view of what’s going on with your business.
Email automation is another small but powerful use of software to simplify bookkeeping. You can set emails ahead of time to collect payments, along with reminder emails for payments that are due or past due, or any situation you may encounter.
Say goodbye to forgetting to follow up.
Finally, setting up a database or file management system and systematizing your process with a great SOP will help you keep track of all your income and expenses and make account rectification all the easier, especially as you’ll be tracking it live.
Of course, setting up these systems can be a daunting task. But with virtual outsourced bookkeeping, you’ll have it all taken care of for you. With the outsourced solution, all you’ll need to do is drop your receipts into a folder and your virtual bookkeeper will take care of the rest.
Click to Find Out How A Virtual Ecommerce Bookkeeper Can Simplify Your Bookkeeping.
File All of your Business Receipts for Simpler Bookkeeping and Accounting Later
Filing Receipts Will Simplify Bookkeeping and be a Life Saver During Audit Time
This ties back to our point about poor organization. Poor organization can lead to some really nasty situation.
Like audits, due to your books not being as clear as they could be. Now an audit is annoying for everyone, no matter how organized. But imagine as part of that audit you need to show some receipts that you neglected to keep.
Well, your audit just went from annoying to painful.
If there’s one takeaway you should get from this article, it’s this – simplifying your bookkeeping is crucial to avoiding unnecessary audit pains.
So file your receipts. In fact, going back to another tip, there are plenty of software offerings you can use to scan paper receipts and store them in the cloud, to be accessed anywhere, anytime.
Combine that with an accounting program (we use Quickbooks Online) and you’ve got a recipe for saving time and money.
Of course, an outsourced virtual bookkeeping service does all of this for you, no questions asked.
Set Money Aside for Potential Taxes Owed to Help Make Bookkeeping Easy
We get it, this one is going to make some people roll their eyes. When you’re building a business from scratch you want to invest everything into it, the last thing you want is to just have some money sitting on the side instead of reinvesting your earnings, but nothing is worse than coming up short with the government.
Many government tax authorities such as the IRS require founders to make estimates of your tax liability and to make payments on it throughout the year. We wouldn’t blame you for forgetting about this while trying to run a business.
That’s what you should always have that cash separate and set aside so that you always have cash on hand to pay anything you may owe.
Simplify Bookkeeping by Getting Help with Tax Assessment
A good bookkeeping system like we talked about earlier can help you gauge how much you owe with far less hassle.
Find a great bookkeeper or accountant who is an expert in your niche, and you’ll make both of your lives much easier when they’ll be able to go through your books easily thanks to an organised system.
From there, those experts can recommend exactly how to save money on your taxes and how much you might be able to save.
Stay up to Date on Tax Reforms for Small Business
If there’s one thing to pay attention to, it’s the constantly changing tax rules for small businesses.
Business taxation can be more complicated than personal taxation, or at the very least will take a bit of time to get used to the differences between the two. This is another place where having an expert bookkeeper in your niche can be a lifesaver.
Those experts can help you understand recent changes and give you insight into what other companies are doing.
No matter how good software gets, it will never be able to provide that service.
Work with a Dedicated Bookkeeping Team for Easy Bookkeeping
You want to make sure you’re delegating the bookkeeping work to the same people who understand their roles when it comes to handling receipts, invoices and tracking sales so that they can easily interact with your bookkeeper.
In-house may sound like bookkeeping made easy, but the reality of it is that it requires more oversight, training, and systems to be set up. All of this is additional work for the founder that could be focused everywhere. Not to mention the hidden costs of staffing an in house bookkeeper.
If you decide to outsource your bookkeeping, the training becomes way simpler. All the person responsible needs to do is mainly shuffling receipts or invoices into a folder shared with your virtual bookkeeper.
Just Outsource your Bookkeeping to a High Quality Virtual Bookkeeping Team
At the end of the day, as a founder you can do all of the tips outlined here on your own.
But there’s an opportunity cost: money you leave on the table by failing to grow your business as quickly as you could have.
With businesses in their early stages, that opportunity cost is HUGE.
Founders stand to gain much more by just outsourcing to a virtual bookkeeping service who can do all of their invoices, invoicing, and more, freeing up founders to really be able to focus on growing their business.
Click here to find out which virtual bookkeeping service package your company needs.
