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year end bookkeeping checklist & bookkeeping advice

 
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For those who are new to owning a business, or even those who aren't and who might appreciate a check list, here is one I created for my QuickBooks clients. Though it applies to any business software you might be using - even if it's just a spreadsheet.

I might not have time to answer questions until February, but if you're curious about "owner's equity" or other terms, ask away and I'll do my best to explain. Just later.

Filename: Year-End-Review.pdf
Description: Year End Review Checklist
File size: 56 Kbytes
 
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Thankyou for this.  I have to say it looks very daunting from a beginners point of view.

This year is my first year with a proper business so I want to make certain I start well.  My theory is if I record all my income and I record all my expenses, and if these two numbers match the numbers in the bank account, then the government will be happy with me.  But I suspect it is a lot more complicated than that.

Any tips or tricks for a novice business owner?

 
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I use QuickBooks Desktop Pro to record all the money coming in and going out of our business. I can see a "picture" of what's happening with business money at any time, and with just a few clicks I have everything my accountant needs come tax time. I have found it is best to get into the habit of recording things on a regular basis. I do it every two weeks. If you let the paperwork pile up without recording transactions (no matter what program you use), you'll dread the end of the year. And, needless to say, backup your files each time you make new entries...either in cloud storage or a device other than your computer.
 
r ranson
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I was thinking about QuickBooks but I only have one inventory item so I'm not certain it's worth the expense.  Also, I'm told that there are only four bookkeepers in town that know QuickBooks.  

I do like QuickBooks though. My friend uses it at his warehouse and I sometimes help out there.  It's brilliant to see everything, especially inventory management.  We can see at a glance what is on the shelf, what is pre-sold but not shipped yet, and how many more are coming in and when.  

Every two weeks sounds good.  I was going to do it monthly, but I think more often seems better.  I also need to find out what the government thinks is okay business expenses.  Typewriter ribbon can go in office supplies, but what about the coffee I bought when I was meeting with the printer's sales rep?  My head hurts just thinking about it.  
 
Jocelyn Campbell
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Ah, gosh, I see that the document I saved here is not really applicable to new, or simpler businesses. Let me see if I can rework things a bit.

Bookkeeping Goals
Basically, I think most folks want at least these few things taken care of by their bookkeeping. Of course, your business, or your preferences might have you adding much more to this list.
  • easy totals for filing year-end income taxes (or any other taxes)
  • easy totals for being able to tell if your business is doing well (or if not, where the shortfalls or overages have come from)
  • proper bookkeeping to avoid fines, penalties, audit protection, etc.

  • Audit Protection
    Isn't this what we want, less stress if an audit occurs? Here's what I recommend so that you will "look golden" if you are ever audited. (In some areas of business, it's not "if" you are ever audited, but "when.")
  • have separate bank (and credit card/loan, if applicable) accounts for business and personal activity
  • reconcile business accounts to the statement each month
  • properly record cash activity or personal accounts used for business activity
  • have ALL deposits properly identified (in whatever bookkeeping system you choose)
  • avoid "miscellaneous" or other overly vague terms in your books

  • Bookkeeping Options/Recommendations
  • A. bank account download or reports
  • B. Excel (or other app) spreadsheet, checkbook register, or columnar pad/register
  • C. bookkeeping software

  • A. bank account download or reports

    --.csv files - The simplest option here is to download a .csv file of all your banking activity (in your business bank account, of course) from your online bank account. A .csv file is a "comma separated values" file and is usually available to download from online from almost every bank these days. .csv files easily convert to Excel files, or Google Sheets or other app files for categorizing, running totals, etc. Just note that some banks only have limited time frames available online, so you might need to download regularly over the year before the data is no longer (easily) available. This is less common than it used to be, but is still a thing with smaller banks or small credit unions.

    --other bank reporting - a lot of online banking is getting more and more sophisticated. Some online bank systems allow you to categorize income and expense within your own banking profile/online register and even set up budgets or analyze spending and cash flow. This often allows for reporting directly from your bank's online system, or having categories download with your other banking data (whether in .csv or other formats). If you use your bank's online billpay to pay your expenses, this often comes with a lot of reporting options as well.

    --aggregate bank sites - in the past, I worked briefly with mint.com and looked at other free online services that will take all your online accounts and create one place for your to total and review them. For example, you might have a checking account with Bank of Mullein, and credit card with Daffodil Credit Services, and a savings account with Dragonfly Online Bank. Setting them all up through something like mint.com (which I haven't even checked to see if it's still operating) would give you totals for all three.

    Note that it's still important to reconcile to the bank statement for these methods and note this somehow in your records.

    B. Excel (or other app) spreadsheet, checkbook register, or columnar pad/register
    However you get your data in to Excel, some kind of register, or even an old-school columnar pad, this is completely serviceable for a lot of small businesses. Again, reconcile to the statement each month.

    C. bookkeeping software
    When is it a good idea to level up to bookkeeping software and what are some options?
    Here's when I recommend leveling up to bookkeeping software:
  • you have customers who owe you money over a period of time that needs tracking, invoices, and/or statements ("receivables")
  • you owe bills that need to be tracked over a period of time ("payables")
  • you have inventory to track
  • you have multiple loans or equity sources, or other tax reporting requirements like payroll or sales tax

  • Here are some software options to consider and a few of their rough price points:
  • QuickBooks (QB) for PC desktop - note that the Mac version is being discontinued - can be as low at $5-7 per month (U.S.)
  • QuickBooks Online (QBO) - more like $30-40 per month (U.S.)
  • FreshBooks - also an online version - might be similarly priced as QuickBooks Online
  • Wave.com - free and claims it will always be free
  • Xero.com - probably similar in price to QBO and FreshBooks

  • QuickBooks has almost held a monopoly on the small business bookkeeping software marketplace. It is what I know best and what most small business people know. When QB branched out in to QBO, the online version was really, really awful. They have since improved it quite a bit, though it's still a desktop software attempting to be reworked in to online software. While I have not worked with Wave or Xero, they were designed to be online applications, so I imagine they might work better than QBO. I have worked with Wave recently, and it's okay. It would suffice for simple enough businesses. (Here's an article on why a startup dumped Wave for Xero.)

    Similar to going from a spreadsheet to software, IMHO, there are a few key reasons to go from a desktop app to an online app:
  • you want to make invoices on the go or onsite (at a client's or at a job site) with your smart device
  • you and/or your employees want to access the books from multiple devices (without a server or LAN, or WAN)
  • you have remote employees or other helpers (accountants, consultants, board members, etc.) who also need access to the current/live books


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    Jocelyn Campbell
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    And YES to Jim's habit of recording regularly. We all are so distracted these days that we can't remember shit what that $20.52 was spent on.

    Please record regularly to save yourself headaches.

    I often see a similar problem with the linked banking. In desktop software, you can load "bank feeds" or import banking activity. In the online software, you can link your software to your online bank account and it will (usually) load in all your banking transactions for your "approval" or "matching" before they become part of your books. In all versions of doing this, there is software "training" that happens - anything from Staples get booked as office supplies expense, for example - and yet this "training" can go awry or become messy. Especially if your vendor names or accounts are overly similar.

    IOW, with the bank feeds or linking, it's easy to become complacent and then have the activity categorized incorrectly, so even then, regular, thorough review is recommended.
     
    Jocelyn Campbell
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    Being self-employed in the States might be similar to being self-employed in Canada and other countries.

    If a U.S. self-employed person makes enough net income, the IRS requires quarterly tax deposits. Penalties and interest can accrue if these deposits are not made on time.

    The upside of being self-employed is that one can deduct other expenses (again, in the U.S.) such as:
  • travel costs (for your vehicle, this is the greater of either (a) actual expenses prorated per miles driven for business or (b) $0.545 per business mile in 2018*)
  • office supplies (this can include coffee, tea, and snacks for your office)
  • computer expenses
  • business meals - only 50% is deductible and you must note business purpose
  • unreimbursed tools, materials, etc.
  • training or education
  • licenses, dues, subscriptions
  • phone (only a business portion of cell phone use is allowed)
  • home office expenses such as internet and other utilities can be tricky to deduct - consult a CPA.

  • More info on U.S. self-employment tax at http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center.

    *Note that charitable and medical miles driven can also be deducted at the following 2018 rates (though these last two might be subject to expense itemizing thresholds - I'm not sure):
    --54.5 cents per mile for business miles driven
    --18 cents per mile driven for medical or moving purposes
    --14 cents per mile driven in service of charitable organizations

     
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