Basic Guidelines to Bookkeeping for Small Businesses and Nonprofits

In my work as a bookkeeper, I have encountered some basic concepts that many small businesses and nonprofits do not employ in their financial record keeping. Here is a brief list of guidelines to help you keep better records of your finances and make financial reporting and bank reconciliations easier. Most of the ideas can be employed with any accounting software. These are written with QuickBooks in mind.

  1. Keep your chart of accounts as simple as possible.
  2. Transaction details should be found in line Items, Classes, Divisions (if using QuickBooks online). More details can and should be added in the memo line.
  3. Try to keep your lists as top level items. Avoid having sub-accounts and sub-items.
  4. Use account numbers to keep accounts together in the list of Chart of Accounts. Use the same first three letters for items you want to show together in your Items List.
  5. Every single financial transaction in the real world should have a corresponding entry in QuickBooks.
  6. Every single transaction in QuickBooks should have a real world document to back it up.
  7. Each of the entries on your Bank Statements should match a QuickBooks transaction.
  8. All of your entries in QuickBooks should include the date, the name (vendor or customer), an item and reason or description of it, and the amount. If you are using classes and locations, then each entry should include the class on each line and location on each transaction.
  9. If you have cash accounts that are not institutional (cash bag for craft sales at Fairs, for example), you should have a written method of documenting the trail of money into and out of the account.
  10. Each non-institutional account should have a written record of transactions that match each entry in QuickBooks.
  11. If your business or nonprofit reimburses employees, board members, or volunteers for purchases made from personal funds, than you should have an “accountable” (IRS.gov) method for recording the reimbursements.
  12. Reimbursements given to employees, board members, and/or volunteers will be recorded in QuickBooks under the correct account. I.E., reimbursement for stamps shows the account as Postage, not Reimbursed Expense.
  13. Reimbursements, refunds, and rebates are not income to your business or nonprofit. They are credits to the expense account under which they were originally recorded. I.E, bought light bulbs for office and got a $10 rebate. Original purchase increase the Supplies expense account and the rebate is a credit which decreases the Supplies expense account.
  14. Any financial action completed in the real world can be duplicated in your bookkeeping.
  15. If you are making the same transaction entries over and over, memorize them or make them recurring. Memorized transactions and recurring transactions make data entry quicker and easier.
  16. Use correct spelling and capitalization in all transactions to make reports neat and presentable.
  17. Double check each transaction BEFORE entering the transaction. Editing a transaction after it has been saved shows in the audit trail.
  18. Avoid editing transactions. Any changes that need to be made to a transaction should be done with a well-documented Journal entry.

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