When you first started your financial advisory practice, bookkeeping was likely low down on the list of tasks you enjoyed; if you're like most small business owners, that's probably still true today. Looking after clients' financial matters is one thing, but having to organize, track and report your own business transactions can be a pain - one for which you don't get paid. However, keeping on top of your books saves you penalties and interest, and can give you critical real-time insights into how your business is doing and where it's heading. Here are five tips to keep your books current with the fewest number of headaches.

SEE: The Evolution Of Accounting

1. Set up a Simple File Folder System
Even if you find it difficult to regularly input your business receipts and invoices into your bookkeeping system, keep them easily organized by setting up a filing system that stays on your desk. Label each folder with common expense types, such as meals, car expenses and office supplies. Label one folder "miscellaneous" so that you have a catch-all file for receipts that you're not sure what to do with. When you receive a receipt, file it immediately before it becomes a semi-permanent resident in the piles of paper on your desk. Keep all of your bank statements with your receipts, so that you can review them to be certain you have accounted for all of your income and expenses. When you are ready to do the bookkeeping, all of your receipts will be right where you need them.

SEE: 8 Steps To An Organized Financial Life

2. Choose a Bookkeeping Method That Works for You
The bookkeeping system that is right for you depends on many factors, including the size of your practice, the types of expenses you incur and the volume of business you do. You may choose a computerized accounting program, such as QuickBooks, or simply have your cash inflows and outflows recorded in a manual ledger. Whichever method you choose, it is important that it not be prone to human error and make sure it is easy for you to get the numbers you need to run your business and pay your taxes. Keep in mind that computerized systems don't do the bookkeeping for you. If you enter incorrect information, you'll get incorrect information.

3. Block off Time Regularly to Record Transactions
In your practice, you have to juggle the needs of many clients, plus take care of the day-to-day demands that every business owner faces. Bookkeeping is likely far down your list of priorities and this often means that it gets ignored. Getting behind on the books, however, can cost you in tax penalties and interest if you are not filing on time. It also means that you can't use your financial history in a timely manner to plan for the future.

Set aside some time every week, or month, to stay current with your bookkeeping; block it off in your day planner, turn off your phone and ignore the computer. Give the task the attention that it deserves.

SEE: Starting A Small Business: Record Keeping

4. Spend Time Reviewing Your Financial Statements
When you enter transactions into your bookkeeping system, you create balances. Your revenue and expense balances form your profit and loss statement, which tells you if you are making or losing money. Your assets and liabilities form your balance sheet, which tells you what your practice owns and what it owes.

Your profit and loss statement will be used in preparing your taxes at the end of the year, but it also gives you some important insights into how you're doing. If, for example, your expenses are consistently higher than your revenues, you are not running a profitable business and are likely to experience cash-flow problems in the near future. Knowing how your business has performed in the recent past helps you to make adjustments to remain profitable in the future. Set aside time, at least quarterly, to review your financial statements and compare them to where you thought you were going to be.

5. Consider Hiring a Bookkeeper as Your Business Grows
As your financial services practice expands, you may find that you have less time for administrative duties, including bookkeeping. Rather than letting it get behind, consider hiring a professional bookkeeper to come in for a few hours and keep you current. When deciding whether you can afford one, consider how much revenue you could generate if you spent time on client acquisition, rather than administration. Having a professional come in can be a cost-effective and efficient way to make sure you are on top of the numbers.

The Bottom Line
Bookkeeping may not be the most fun task in your financial services practice, but it is one of the most important. Setting up an easy-to-manage system and dedicating time to keeping it current, helps to keep your business profitable and on the right track.

Related Articles
  1. Investing Basics

    How To Invest In Private Companies

    Owning a private firm means sharing more directly in the underlying firm’s profits.
  2. Entrepreneurship

    How to Run a One-Person Business

    Learn how to get a successful one-person business up and running with a business plan, financing, time-management tricks and delegation of tasks.
  3. Entrepreneurship

    Top Legal Tips for Starting a Business

    Before you launch a new business, make sure you're on top of the key issues that most startups face.
  4. Investing News

    The 10 Fastest Growing Green Startups in 2016

    These social entrepreneurs adopt triple bottom lines that champion urgent environmental problems while generating returns for shareholders.
  5. Retirement

    Roth IRAs Tutorial

    This comprehensive guide goes through what a Roth IRA is and how to set one up, contribute to it and withdraw from it.
  6. Entrepreneurship

    Multilevel Marketing Isn't Always A Scam, But It Often Is

    Nerium and Amway are popular direct sales companies that recruit new buyers and sellers to make a profit. Sadly, many direct sales firms are scams.
  7. Entrepreneurship

    10 Characteristics Of Successful Entrepreneurs

    Do you have the qualities of a successful entrepreneur? Those who do tend to share these 10 traits.
  8. Investing

    5 Up and Coming Social Media Startups

    Although the days of Facebook's dominance aren't close to being over, here are some new creative platforms gaining traction on the worldwide web.
  9. Entrepreneurship

    Are You Really an Entrepeneur? A Reality Check

    If you are going to be an entrepreneur, and you’re doing it on a shoestring, you’ll need more than a good idea. Here are some skills to master.
  10. Entrepreneurship

    Digital Nomads in the Modern Economy

    Digital nomads compose a growing portion of the modern economy.
RELATED FAQS
  1. How is a Limited Liability Company (LLC) taxed?

    To generate financial states using grouping schedule codes for trial balances, bookkeeping and double-entry bookkeeping requires ... Read Full Answer >>
  2. How do I import QuickBooks Pro Account trial balances for the first time?

    You figured out how to create invoices, track sales, streamline your bookkeeping and gather data on your business with Intuit's ... Read Full Answer >>
  3. Can I use my IRA to pay for my college loans?

    If you are older than 59.5 and have been contributing to your IRA for more than five years, you may withdraw funds to pay ... Read Full Answer >>
  4. Can I use my 401(k) to pay for my college loans?

    If you are over 59.5, or separate from your plan-sponsoring employer after age 55, you are free to use your 401(k) to pay ... Read Full Answer >>
  5. Can I buy insurance to reduce unlimited liability in a partnership?

    Partnership insurance is actually quite common. Most of the time, partners buy insurance to safeguard against the possibility ... Read Full Answer >>
  6. What are the benefits of prorating expenses?

    When a person prorates expenses between personal and business expenses, he is able to capture the maximum amount of tax benefits ... Read Full Answer >>
Hot Definitions
  1. Short Selling

    Short selling is the sale of a security that is not owned by the seller, or that the seller has borrowed. Short selling is ...
  2. Harry Potter Stock Index

    A collection of stocks from companies related to the "Harry Potter" series franchise. Created by StockPickr, this index seeks ...
  3. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  4. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  5. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  6. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
Trading Center