Top 5 Bookkeeping Fundamentals Every Business Owner Should Know
I Can’t Stress This Enough!
The Key Fundamentals of Bookkeeping & Financial Oversight
Managing bookkeeping and financial oversight is essential for every business. Over the years, we’ve worked with dozens of small businesses, and the lessons we’ve learned boil down to a few key principles.
These aren’t just tips—they’re non-negotiable fundamentals that can make or break your business's financial health.
1. Reconcile Your Bank Accounts Regularly
“I can’t stress this enough!”
Why it’s crucial:
Reconciling your bank accounts with your accounting system ensures that your financial data is accurate and up-to-date. It helps identify errors, detect fraud, and maintain cash flow awareness.
Best practices:
Reconcile often: Don’t wait for the month-end statement. Instead, reconcile your accounts daily, every two days, or weekly.
Monthly reconciliations: Always perform at least one reconciliation per month against the bank statement to ensure everything aligns.
High standards: A bookkeeper who reconciles daily? That’s someone who knows their craft—give them a high-five!
2. Keep Business and Personal Transactions Separate
“I can’t stress this enough!”
Why it’s critical:
Mixing personal and business transactions creates confusion, increases bookkeeping costs, and complicates tax preparation.
How to simplify:
Dedicated accounts: Use separate bank accounts and credit cards for business transactions. If a transaction hits these accounts, it’s always business-related—end of story.
Avoid extra costs: Commingling increases time and cost, especially if you’re paying a bookkeeper by the hour or handling it yourself.
3. Seek Help Before Problems Escalate
“I can’t stress this enough!”
Why it matters:
Falling behind on bookkeeping can snowball into an expensive, time-consuming issue. Addressing it early saves you time, money, and stress.
What to do:
Catch it early: If the bookkeeping is slipping, take action immediately.
Ask for help: Don’t hesitate to reach out. Email us at care@TheNumbersEdge.com for suggestions or referrals to professionals who can assist.
4. Review Your Income Statement and Balance Sheet Monthly
“I can’t stress this enough!”
Why it’s important:
Understanding your financials starts with looking at them regularly, even if you’re not an expert. Over time, familiarity with these reports will help you gain confidence and control.
Action steps:
Make it a habit: Set aside time each month to review your income statement and balance sheet.
Start small: Even if you don’t fully understand the numbers, practice makes perfect.
Learn and grow: Leverage resources like TheNumbersEdge.com to build your financial literacy.
5. Always Ask “Why?”
“I can’t stress this enough!”
Why it’s transformative:
Asking “why” turns financial statements into actionable insights. It’s how you uncover trends, spot potential issues, and make informed decisions.
Questions to ask:
Why is office supplies spending higher than last month?
Why did cash decrease when the income statement shows a profit?
Why has revenue been increasing for three consecutive months?
Keep asking “why” until you understand your numbers.
Bonus: Tools and Resources
Daily reconciliation tools: Use software like QuickBooks or Xero for seamless bank account reconciliation.
Monthly report templates: Create or download templates for reviewing income statements and balance sheets.
Expert guidance: Explore free resources at TheNumbersEdge.com for tips, templates, and training on financial management.
Final Thoughts
These fundamentals aren’t just best practices—they’re the foundation of solid financial management for your business. By following these steps, you’ll set yourself up for success, save time, and gain greater control over your financial future.
If you’re struggling with any of these areas, reach out to us at care@TheNumbersEdge.com. Remember: It’s better to address issues early than to let them grow into bigger problems.
What’s your next step? Start today. Reconcile your accounts, separate personal and business finances, and ask “why” until you understand every aspect of your financials.