Hey, friend! Today we’re digging into three different blind spots that you might have as you’re doing your business bookkeeping. Sometimes we get so into our groove of doing something, that we don’t even realize when something is being done incorrectly. It’s so good to be aware of these little things that can really mess things up, even though you may not realize it!
Let’s dig in!
This one is is listed as #1 for a reason. Not reconciling is a huge issue, and here’s why:
Reconciling is making sure your beginning bank statement balance + all revenue transactions – all expense transactions actually equals your ending bank statement balance.
Sometimes we can get so carried away entering transactions into our books (especially if you’re using integrations or Zapier to get info into your software!), that we don’t even realize we may have missed a transaction or duplicated a transaction.
And if that’s the case, you’re reviewing incorrect data on your P&L… yikes!
Reconciling is a non-negotiable step that all of our bookkeepers perform for our 1:1 clients at Madison Dearly Bookkeeping, so we can ensure we’re looking at clean, clear, reliable data.
Could you imagine pulling up your P&L and thinking you had a $5,000 profit, when it was actually $500? That can easily happen if you’re not reconciling.
Whether it be Stripe, PayPal or Honeybook, you should absolutely be splitting out the fees from the revenue in each transaction that hits the bank.
When you get a payout from Stripe, the amount that hits your bank account is what your client paid you, minus the Stripe fees.
And if you’re categorizing that entire transaction as Sales, it’s simply inaccurate.
In most accounting software (Xero is our fave), you should be able to split transactions directly from the bank feed.
If you have the ability, drill down into the detail of what was the gross revenue (i.e. $600), then identify the fee amount (i.e. $18), add each of those as line items within the transaction ($600 goes to brand + web design payment, -$18 goes to Stripe Fees), then the net of the two should equal the total of the transaction that was imported into your bank account.
In the first scenario, your revenue would say $582 for Brand + Web Design, and $0 for Stripe Fees. In the second scenario, your revenue would say $600 for Brand + Web Design, and $18 for Stripe Fee expense.
One is accurate and one is not ?
Are you categorizing all of the “money in” on your bank feed as “Sales”? If so, STOP PLEASE.
That’s just going to give you a lump sum on your P&L that just says… well, Sales.
And is that actually helpful or dynamic information? No.
(I’ll give you a pass if you can pull a split by revenue stream report from your CRM or invoicing software… but it still doesn’t feel good to say that haha)
Take the time to identify which transaction was for which revenue stream (i.e. Package One, Package Two, Package Three, 1:1 Mentoring, Membership, etc. etc.), and categorize it as such.
In other words, the offerings on your Services page should match the revenue section of your Profit & Loss statement.
I’ve had COUNTLESS lightbulb moments with clients when we started working with them and they saw the percentage split for each of their revenue streams.
You might not realize that you’re dumping all of your time and energy into something that really isn’t bringing in as much revenue as you thought!
Bookkeeping requires a lot of attention to detail, but I promise it becomes second nature, especially if you know what to be looking for!
If you’re doing it all yourself (go YOU!), but would love to lean on me and my team for questions, we’ve got our monthly bookkeeping membership – The Business Book(keeping) Club – ready for you! This is a place where you can ask questions, have 1:1 calls with professional bookkeepers for troubleshooting help and access to a huge library of (actually) helpful resource videos on how to do your bookkeeping. We would love to welcome you to the club!
OR if you find yourself setting this all up and you want to bang your head against a wall, take a deep breath and give it over to us. We love this stuff and we will take good care of it FOR you ?
Whatever you choose, know that we are here for you – kinda like a bookkeeping big sis. Let us know how we can help!