10 Ways New Business Clients Can Keep Good Books

Unless your new business clients come from an accounting or bookkeeping background, they’re not likely familiar with accounting software or terminology.

Unfortunately, they often cannot afford to pay for even our most basic services. And, even though we want to help them, we have to keep our own workloads and profitability in mind. This often leaves new business owners to do their own bookkeeping.

Fortunately, this is an area where we as professional bookkeepers can help, provided that we follow a few guidelines as we advise new business clients to keep their books in good shape.

1. Keep it simple. Remember, business owners aren’t accountants or bookkeepers. The things that come easy to us with our years of education and experience are completely foreign to them. When you’re advising a new business owner on how to do their bookkeeping, keep your explanations as simple as possible.

2. Encourage the use of (appropriate) software. Budgets for new businesses are notoriously tight, and many new business owners are tempted to use cheap or free accounting software. This has several pitfalls:

• It’s often hard to find support for cheap or free software.
• The software can have bugs that only an experienced financial professional can detect.
• Free software is often single-entry instead of double-entry, increasing the likelihood of hard-to-diagnose errors.
• When the business owner is ready to upgrade, they might have to start their books over from scratch.

Encourage new business owners to invest in the best software they can…but again, keep it simple. Recommend only as much as the business needs right now. You can help them upgrade or add apps as they grow.

3. Provide them with a chart of accounts. Again, simplicity is the key here. Create a simple chart of accounts that will provide the business owner with enough detail to produce good reports, but not so much that they get bogged down in the details. And discourage them from creating new accounts on the fly, as this is one of the easiest ways for non-accountants to create messes in the books.

4. Help them understand the relevant reports. I’m not talking about full financial analysis here. Remember, we’re advising these new business owners on how to keep their books in good shape. Your explanation of the P&L and Balance Sheet should be limited to that, at least in the beginning. Explain to them which accounts should never show a negative balance and how to run a side-by-side comparative report to detect potential errors. And that’s it (at least for now.)

5. Forbid journal entries. Okay, maybe “forbid” is too strong of a word. But at the very least, we should be heartily discouraging new business owners from creating journal entries. Everything a new business owner needs to do in their accounting software can be accomplished with a form-based entry (sales receipt, invoice, bill, etc.)

6. Explain checks and balances. Business owners should put checks and balances in place the moment they hire their first employee or contractor…even if that person doesn’t manage the bookkeeping for them. Explain the importance of checks and balances and the simple steps the business owner can take to reduce the risk of employee fraud.

7. Provide basic training. This is the absolute best way to ensure a new business owner keeps their books in good shape. Show them how to categorize transactions in their bank feeds and complete other simple things they might need to do, like creating invoices. Warn them about the common pitfalls of AI, like incorrect account suggestions (what is an Uncategorized Asset, anyway?) or applying an incorrect payee name to a check.

8. Consider offering oversight. If you have the capacity to do so, offering monthly or even quarterly oversight of the new business’s books can give both you and the business owner peace of mind. Here’s the caveat: You have to commit to not fixing errors you find. Instead, create a video explaining the problem and the correct way to make the entry, and then have the business owner fix the error. This will not only prevent you from doing clean-up work for free, it will also encourage the business owner to become more astute about their bookkeeping.

9. Check in frequently. New businesses become established businesses quickly, and the business owner who has time to do their own bookkeeping today may not have time to stay on top of it three months from now. Checking in with the business owner frequently keeps you top of mind when they are ready to relinquish the bookkeeping duties for their business. Moreover, your job will be easier if the books are only a few weeks behind as opposed to being months behind.

10. Be patient. Remember what it was like when you first started your bookkeeping practice. You probably did everything yourself…including the things you weren’t that good at. And it was probably really hard to let go of some of those things as you grew…including the things you didn’t particularly like. AND you probably weren’t particularly fond of “outsiders” implying you were doing things incorrectly…even if you’d hired them to help you with your business.

Final Thoughts

All of this holds true with other new business owners. Expect pushback, even on things the business owner admits to not knowing much about. Be patient when it happens. The business owner will thank you for it, someday.

The key to advising new business owners on how to keep their books in good shape is to keep your advice as simple as possible and matched to the business’s needs in the moment. Put some guardrails in place to help prevent errors and messes, and check in frequently so you can advise the owner in a more robust manner when the time is right and the business’s finances support it.

Want to hear more from Billie Anne, live and in-person? Join us in San Diego, California May 9-12, 2022, for AccountingWEB Live Summit, a brand-new in-person conference and networking event for accounting professionals. 

Hear from many experts in the industry on the future of accounting, discover new fintech for the digital age, and attend CPE accredited sessions to move your business forward. After two years of lockdown, you can spend time meeting like-minded professionals discussing tips, tricks, and the challenges you face at breakfast briefings, networking lunches, and an unforgettable off-site dinner event. Learn more at https://www.accountingweblivesummit.com/summit-what-to-expect