I'm not the type of accountant who likes getting in my billable hours doing data entry into QuickBooks or another type of small business accounting program (FYI - Microsoft stopped selling their small business accounting package last year). So, I'm always delighted when my clients use QuickBooks or the like to keep their own books. It's also great for the business owner as they have immediate access to revenue, expense and inventory numbers instead of waiting for me to prepare a set of books.
However, the time and billable hours I save when my clients do their own accounting entry can easily be expensed when I have to clean up my client books because they've made mistakes during entry. You don't have to be an accountant to enter transactions into small business accounting programs correctly the first time. Here's how!
Arts and Crafts Business Chart of Accounts
The chart of accounts is your vehicle to enter your arts and crafts transactions into the software program. For example, your checking account is given its own chart of accounts number as is your revenue and each expense. While all boxed software packages provide sample chart of accounts, it's important you understand how to set one up since you just may need to add accounts into the sample chart of accounts you pick to use in the future.
No matter what software program you use, there is a standard numbering sequence to the chart of accounts:
100 = Assets
200 = Liabilities
300 = Equity
400 = Revenue
500 - 900 = Expenses
Making sure you classify your arts and crafts accounts properly is very important. If you're not quite sure you've done it right - have your accountant check it out for you.
Don't Mix Arts and Crafts Business and Personal Expenses
Scanning a client's general ledger, I usually notice personal and business expenses grouped together, or an expense category called something like "House Payment'. Ok, even if you operate out of your house, your house payment is not a business expense.
Believe me, I know it's convenient to just pay all your bills at once, out of the same company file. Don't be tempted to do it. Open up a personal business in the same software program and manage your personal transactions through that file.
Keeping Your Debits and Credits Straight
I know, you're groaning and rolling your eyes - debits and credits -yuck! Well, you don't have to understand the rules of debits and credits to keep your debits and credits where they belong. The number one mistake I see? Entering one side of a transaction into the software correctly and not following up with associated entries in the same way.
For example, entering individual expenses on your business credit card statement into the software program step-by-step - which is good. But then not associating the payment eventually made to the credit card company with the individual expense.
Here's the two biggies I see:
When in doubt, always check with your accountant. The expense you'll incur getting some basic bookkeeping training will more than be paid back over the years in reduced accounting fees.