Yes, my friends, on April 14th a few years ago, I had statements and receipts strewn across my desk as I went through each line of Turbo Tax, desperately trying to find the information I needed.
That experience sucked and I’m pretty sure I also lost money because I def missed deductions due to my prize-winning procrastination.
Moral of the story: Don’t be me.
The only good thing to come out of the whole debacle was that the next year, while I still lagged, I did develop a system to get all my information organized fast. Since then, I’ve fine tuned this system- which is what I teach people when they call me one week before the tax deadline (and I’m talking the REAL deadline, October 15th) and desperately need some help.
Well, it’s the end of the year and you might desperately need some help, too.
Here’s my step by step system for getting your bookkeeping caught up FAST:
Step 1: Pick a tracking system
Choose a tracking option that you can implement right away. Even if you bought QuickBooks or some other accounting program, unless you can implement it right away, you aren’t going to use it.
Your “catch up” tracking option is something you can start using that day. Don’t wait for the best thing to come along. It won’t come along. You know what will come along instead? April 15th.
If you are cursed with the “I want the perfect system” syndrome, this blog post walks you through the steps to get over that so you can just START your bookkeeping.
The three most common tracking options are:
Paper tracking Sheet
Digital accounting software
For bookkeeping catch-up work, I recommend a spreadsheet. Spreadsheets are more robust than a paper tracking sheet but easier to learn. If you choose to go the spreadsheet route, you can use the one I made that is designed to help you get your bookkeeping caught up fast.
Step 2: Set up your tracking system
After you decide what to use, you need to set it up. There are a few key things you need to know before you get your bookkeeping setup.
The first is: What are my income streams? Another way of putting this is “how do I make my money?”
You don’t need to get deep and complicated here, just the basic structure of how your business makes money. Later, you can spend time doing in-depth income mapping (which you can learn in my free biz finance course), but for now, keep it simple.
The second thing you need to know is your expense categories. These are your tax deductions and you want to have a list of these handy. If you’re like, “tax deductions- whhaaaaaaaaa?” check out this cheat sheet, where I go into a detailed explanation about common small business tax deductions.
Don’t forget to include deductions that are specific to your industry. These are usually special supplies that you need to do the type of work you do. Everyone’s expenses are different. For example, a photographer’s expenses are different than a tattoo artist’s.
Regardless of what type of tracking system you use, setting it up means pre-loading your income and expense categories into the system so that it is ready to go for the next steps.
Step 3: Gather your materials
Next, you will get everything you need to do your bookkeeping. This is an important step because the whole point of this process is to streamline your bookkeeping. Take the time to gather your materials. Later, when you aren’t frantically looking for pieces of paper, you will be happy that you did.
What do you need to gather?
Hard copies of bank and credit card statements (don’t forget less obvious bank accounts, like PayPal)
Access to digital copies of your receipts
Sales receipts/records of sales you made
Step 4: Categorize your statements
List of income/expenses that you came up with in Step 2
On your list of income/expenses, write shorthand abbreviations for everything on the list. So, Meals and Entertainment might be ME. Advertising and Promotion- AD and so on. Develop a key of abbreviations for your income/expense list.
Now, go through each line of your statements and, writing directly on statements, make shorthand notes about the category of each expense. Every single line of your statement should have a shorthand note about the category.
What if you can’t remember what something is? Highlight it! Don’t get caught up in the research yet! This will distract you and you will lose valuable categorizing time. If there is an expense that you are unsure about, or can’t remember what you bought, just highlight it and move on.
Step 5: Research highlighted expenses
Now it’s time to use your receipts and sleuthing skills to go through all the highlighted expenses and get answers. Remember how we gathered your receipts, invoices, and sale receipts. This is the time you will be using them.
There are some tricks to figuring out what an expense is. Here are the steps I use when I get stuck:
Look for a receipt. This should be easy because in Step 3 you organized your receipts by month to make them more manageable. Look at the receipt and see if it tells you what you need to know (note, if you think the expense was something you bought online, be sure to check your inbox for a digital receipt).
If you don’t have a receipt, Google the name on the statement. Sometimes names on statements show up weird and just Googling the name can tell you what the business really is
Check your calendar and see where you were that day. Just looking at your calendar will jog your memory about what you were up to that day
Step 6: Enter your transactions into your tracking system
At this point, you have primed everything to enter into whatever tracking system you have chosen. The information gathering portion of this process if over!
Now, you just have to do the not so fun work of actually getting it into your tracking system, which means this step is all about data entry.
I recommend breaking this step up over the course of several days or weeks. Data entry is tedious and can get REALLY boring. Be nice to yourself and start this process early enough where you are only doing it for 1-3 hours a day. Your body will thank you.
Step 7: Review your entries
The last step is to review your work and check for errors. This means scanning everything that you typed in and making sure there aren’t any glaring mistakes- like double entry of the same expense or numbers that are really out of whack.
This can happen (and it happens to me too) because when we do something repetitive our brains go on autopilot and we can zone out and add an extra zero somewhere.
Entering the same transaction in twice
Ready to get started? Down the QuickStart Spreadsheet and start getting your bookkeeping caught up and done now!