How To Get Caught Up When You’re Behind On Your Bookkeeping
You look at your to do list, everything got checked off the list except bookkeeping…again. You realize this is quickly becoming a habit that you can’t shake. Every week, you re-add bookkeeping to the list and every week it doesn’t get done.
At some point you might even start leaving it off the list altogether because the guilt of seeing it unchecked on your list week after week is awful and quite frankly, you just don’t want to think about it anymore.
If this is you, I get it. Bookkeeping is boring. But more than that, if you don’t know what you’re doing and don’t have a workflow it can be really confusing and time consuming.
So today I want to give you the steps to take if you’ve let your bookkeeping slide one to many times and now you’re behind.
Gather What You Need Before You Begin
1. Get All Your Transactions Organized
If you’re using a spreadsheet, this means entering all of your sales and expenses including dates, customer/vendor, and amount received/spent.
If you’re using QuickBooks Online, this means making sure all of your bank accounts, credit cards, loans, lines of credit, PayPal account, etc are connected to the software. You also want to make sure there is no gap in transactions where the software lost connection at some point.
2. Get All Bank, Credit Card, Loan, and PayPal Statements
You’ll need these statements to either help with the data entry piece for a spreadsheet or reconcile your accounts on QuickBooks Online.
3. Make Sure All of Your Receipts Are Filed
You won’t be using this for your bookkeeping necessarily (unless you just forgot what you bought somewhere and need to check the details), but going ahead and having these organized and out of the way will be one less thing on your mental checklist. And in the future if you are ever audited, you will have proof of your purchases for business purposes.
Take It Month By Month
Now that you have everything organized it’s time to start the actual bookkeeping. Some people try to work there way straight through, but I’ve found the best strategy is to do one full month at a time.
I do this for 2 reasons:
1) It varies the work up so I’m not working for hours on end on one task and burn out.
2) If there is a problem, I know it’s in the one month I’ve just been working on. I don’t have to search through months of transactions to find the problem.
1. Categorize Income and Expenses
For tax purposes and for you to actually understand what you spent money on, you can’t just label all expenses as ‘Miscellaneous Expenses.’ You need to be more specific, separating things like software, payment processing fees, contractors, internet, cell phone, etc.
Income is more flexible. You can choose to lump it all together into Services Income or Course Sales, OR you can break it down by product. Just know, breaking it down like that will require more time and effort.
2. Match Transfers Between Accounts, Credit Card Payments, and Loan Payments
Leaving these until the end means you can quickly find matches because they should be the only transactions for the month left over.
Most people can easily understand why you would categorize a transfer of money from a savings account to a checking account as a transfer, but you may be wondering,
“Why do credit card payments and loan payments also get categorized as a transfer? Why aren’t these considered an expense?”
Credit Card Payments
When you bought something with your credit card, that is when you spent money. That is when you categorized that expense. But you also created a liability (money you owe) because you now owe the credit card company that amount of money.
Making the payment on that credit card isn’t an expense because you would be doubling the expense and let’s just say the IRS wouldn’t like that! The payment is actually lowering the liability (money you owe), moving it closer and closer to $0 owed.
Loan Payments
Similarly, loan payments are also not expenses. When you borrow money, you immediately create the liability (money you owe). When you spend the money on things for your business you categorize it as an expense.
Making the payment an expense would double the expense. Instead, like the credit card, the payment lowers the liability, moving it closer to $0 owed.
3. Reconcile All Accounts
Many people skip this step, but please don’t! It’s super important!
Reconciling your accounts may sound confusing, but it’s simply making sure your balance in QuickBooks Online (or your spreadsheet) matches what your bank statement has as the ending balance for the month.
If it matches, you can move forward.
If it doesn’t match, you need to figure out why. Did you forget a deposit or expense? Did you accidentally enter an expense twice? Did you forget to account for payment processing fees being removed before the money was deposited into your account?
4. Rinse and Repeat Until You’re Caught Up
One month down, X more to go! Keep going, you’ve got this!
Make a Plan to Stay On Top of Your Bookkeeping in the Future
1. Remember How Stressful it Was to Get Behind
Remember the guilt you felt. Remember what it felt like to have no idea how much you’ve made and spent. Remember what it felt like to feel clueless about your money. Remember the stress of realizing it just kept piling up.
Resolve that you don’t want to treat future you like this again. You want future you to look back and be thankful that current you took time to get it taken care of while it was only a small amount of work.
2. Say to Yourself, “Do it now, not later. Do it now!”
I know this sounds like suggestion, but it works. I got this suggestion from Chalene Johnson. I was forever saying, “I’ll do it later.” about tasks I didn’t want to do. And of course later comes and I still don’t want to do it. This is how messes pile up and tasks like bookkeeping go months or years not getting done.
Again, treat future you with compassion.
3. Decide On a Day to Do Your Bookkeeping and a Due Date
If you stay up-to-date on your bookkeeping it won’t take long.
DAILY
Some people prefer to go in daily for 5 minutes and take care of any uncategorized transactions. Personally, this was not for me. I did this when I was working on many clients’ books because it was a lot of work if I waited, but for me personally it was too much.
WEEKLY
Some people prefer to do it weekly. This is the easiest frequency in my opinion. It only takes 15 minutes or so and you can easily remember what each expense was.
MONTHLY
And some people prefer to do it monthly; this is the most common frequency. They only have to pump themself up to do it one time per month, 12x per year. It does take a bit longer in one sitting and there might be some expenses you have to think about a little harder.
✘ QUARTERLY
I would not advise trying to do your bookkeeping quarterly as this is simply too long to remember what confusing transactions were. Plus, you won’t have clear data about your money on a regular basis. 3 months later that info isn’t much use.
Decide on a frequency you want to try out and schedule it on your calendar so you can’t “forget” or have something else to do.
4. Co-Work and Get Accountability
We will be launching a new low-cost monthly membership soon called DIY Bookkeeping Together. This will include a monthly bookkeeping co-working call where you can unmute yourself to ask questions as you run into situations you aren’t sure of.
There will also be an accountability piece so you can’t easily fall behind. You will WANT to stay up to date!
Want to be the first to know when DIY Bookkeeping Together opens it’s doors?
If All Else Fails - Get Help!
If you’ve tried to get caught up on your bookkeeping and you’re realizing this just isn’t in your skillset or it’s too overwhelming, it might be time to consider getting help with catch up. Just keep in mind you’ve let the bookkeeping go for several months so the fee to fix it will reflect this.
We give new clients a discount on catch up if they intend to stick with us ongoing for High Vibe Bookkeeping. We also offer payment plans if you can’t pay in full.
Get Started Today, Don’t Wait!
Don’t wait for January to tackle your bookkeeping thinking you’ll have more time and mental space then…spoiler alert - you won’t! Get started today :)
