Most small startups can neither afford, nor do they need, a full-time or even a part-time bookkeeper given the size of the business, and the amount of daily business activities during the early stage. If you are one of such small startups, it is important for you as a startup entrepreneur to understand what bookkeeping activities are involved in your business, and learn how to perform many of these activities yourself.
A few preparatory items to take care of before you start doing your own bookkeeping –
- Subscribe to an online small business accounting software (QuickBooks, Xero, etc.) and find a local accountant who can help you setup your chart of accounts and beginning account balances, and train you for 3-4 hours on how to use the software for most common bookkeeping activities in your business.
- If you are required to run a payroll, outsource it to a local accounting firm. It will cost you between $50 and $100 per pay period if you have less than 10 employees.
- Retain a virtual bookkeeper for only 3-4 hours a month to catch and fix your bookkeeping errors, if any, and “clean up” your books at the end of each month.
- Read a book on bookkeeping basics if you have time and interest to do so.
Now you are all set to do bookkeeping on your own. Here is a list of most common bookkeeping activities for most small startups, broken down by week, month, quarter, and year.
Daily bookkeeping tasks
- Check your cash position against the bills coming due in next 30 days
- Enter customer orders
- Enter vendor orders
Weekly or bi-weekly bookkeeping tasks
- Enter customer invoices and vendor bills
- Enter deposits and payments
- Enter payables and receivables
- Enter payroll data received from your accounting firm
- Deposit Federal payroll taxes and withholdings (if a semi-monthly depositor)
- Pay any bills due
- Follow up on any past due receivables
- Review inventory reports
- Keep copies of all invoices sent, all cash receipts (cash, check, and credit card deposits), and all cash payments (cash, check, credit card statements, etc.).
Monthly bookkeeping tasks
- Deposit Federal and state payroll taxes and withholdings (if a monthly depositor)
- Report and pay any retirement benefits withheld from employee paychecks during the previous month
- Pay and enter sales tax and other state taxes (monthly filers only)
- Review A/R and mail reminder invoices as needed
- Review A/P to find any missing or past due bills to be paid
- Enter principle and interest on any loan payments
- Reconcile all bank and credit card accounts. Click Here to learn how to reconcile a bank statement
- Work with your virtual bookkeeper to “clean up” your books
- Create monthly P&L and balance sheet statements and compare with budgets and forecasts
Quarterly bookkeeping tasks
- Pay any balance due on all quarterly payroll reports
- If FUTA exceeds the threshold for annual filing, pay FUTA tax
- Reconcile payroll liability accounts against quarterly reports
- Deposit Federal and State payroll taxes and withholdings (if a quarterly depositor)
- Pay and enter sales tax and other state taxes (quarterly filers only)
- Review quarterly P&L and balance sheet statements
- If you pay estimated taxes, make your quarterly payment
Annual bookkeeping tasks
- Pay and enter FUTA tax and reconcile all payroll liability accounts for the entire year
- Pay and enter sales tax and other state taxes (if an annual filer)
- Verify and update employee withholding and address information
- Update year-end inventory and capital assets in the books
- Review status of any owner loan accounts
- Renew your business registration and licenses, and review your client and vendor agreements
- Prepare materials for CPA
Since your books were “cleaned up’” each month by your virtual bookkeeper, it will take your CPA less time (hence lower fee) to prepare your year-end financial statements and tax returns.