It’s Time to Clean Up That Accounting System

The start of a new year provides the perfect opportunity to revamp your bookkeeping.
It’s Time to Clean Up That Accounting System

Interested in Business?

Get Business articles, news and videos right in your inbox! Sign up now.

Business + Get Alerts

A new year means a new, clean slate. Take some time now to shed the accounting and financial garbage you don’t need dragging you down. Here are some “Cleanup Tips” for streamlining your financials.  

Sit side by side with every person in your office who enters data. You will probably discover redundant entries, entry fields that populate reports no one needs, too much detail in the notes section or not enough information in the essential fields. 

Establish a “blame free” approach to cutting out any unnecessary steps. You don’t need to waste time determining whose fault it is. Sit down and ask team members questions like:  “What do we do that you think may be a waste of time … yours and mine?” and “What are we not doing that we may be well served to start doing, or restart?” 

Write or update your procedures for basic revenue and accounts payable entries. The procedures listed below encompass 80 or 90 percent of all the accounting and are often where the bottlenecks develop. Keep the systems simple enough so that all the entries are current at least once every week:

  •    Entering customer invoices
  •    Applying the customer payments
  •    Making the deposit
  •    Entering bills
  •    Paying bills
  •    Entering credit card charges
  •    Paying the credit card statement
  •    Recording the payroll journal entry

Have the people who enter the data write or edit the procedures. Then you can review and make edits and update your manuals. It’s even easier when two people work together. One does the entry; the other writes down the procedure.

Switch to an outsourced payroll service like ADP or Paychex. It won’t save you any data-entry time. You still need to keep up with dispatch and job costing.  However, there are a couple reasons this is recommended:

  •  You can be stolen from through your internal payroll system easier than you can be through an external source. It’s easy for an untrustworthy bookkeeper to post a fake paycheck, cash it and remove the entry later. You need good checks and balances and outsourced payroll is part of that. 
  •  The payroll service keeps you current and accurate with your payroll tax reporting and submission. If you make a mistake – or get behind – with payroll taxes, you can find yourself in hot water. The IRS penalties and fines can be capricious and arbitrary. The new year is a perfect time to make the switch and put that worry out of your life.

Clarify and simplify your sales tax collection and reporting. If you can pay sales tax at the counter and be done with it, do that. However, not all states, cities and towns permit it. Certain states, like New York and Arizona, have particularly confusing sales tax requirements. Even if you ask your CPA, you may not get a clear answer. Avalara is one example of a software program that helps you calculate your appropriate sales tax and integrates with many different software programs. Commit to getting your sales tax liability account current and accurate. Work with your CPA to nail down the balance and get caught up. Then make this year clean and tidy right from the beginning for sales tax collection, reporting and submission.  

Route “fixes” through the Income Statement. As you and your CPA nail down the account balances, make adjustments as needed via an income or a cost account. The Income Statement starts over every year. The Balance Sheet ending balances are the beginning balances for the next year. Clean up the Balance Sheet accounts as you wrap up year-end and send the “fix” through the Income Statement. The adjusting entry will impact profit, which is the link between the Balance Sheet and the Income Statement. Leave clues in the memo and description line of your entries that will help you remember what you did and why when you are reviewing data in the future. 

Get rid of excess departments. I am a big fan of “Little Job and Big Job” departmentalization, and only to the gross profit level. Obsessive breakdown of sales and costs into multiple departments won’t help you make better, faster, more profitable decisions. If you are not getting accurate financials every week, having too many departments may be the problem. At the beginning of every year, the Chart of Accounts starts over, so now is a good time to prune and merge departments.

Get rid of excess accounts. Could you lump all phone expenses, for example, into one account? Sure. You can always review the transaction register for details, or take a look in the phone file in the file cabinet. 

Add appropriate accounts for marketing. Here’s the simpler-is-always-better exception: Aim for lots of detail in your marketing accounts. Most everything you write a check for should have its own account. That will help you get a critical statistic for marketing: cost per call per type of marketing. 

Commit to a once-a-week review of a basic financial report. Review income, direct costs of labor and materials, overhead, profitability and cash flow. If you want or need to, add a debt ratio or an inventory amount to the one-page report. It’s easy to do this weekly review. It’s even easier to drop the ball on this habit and let it slip. This financial review keeps the team sharp, honest and focused on the goals. 

Commit to a once-a-month review of the financials with a fine-tooth comb. Go line by line down the Balance Sheet and Income Statement and ask questions and drill down on the associated transactions for each account. It’s your money and your responsibility. Pay attention.

Simplify your recordkeeping. Get current on your reporting. That leaves you and your team free and clear to grow.

It’s also the perfect time to put together a budget if you haven’t already. Read more about creating a small-business budget.

About the Author 

Ellen Rohr is the president of Zoom Drain and Sewer LLC, and is a columnist for Huffington Post, PHC News, and a contributor to many business journals and trade magazines.

Contact her at


Comments on this site are submitted by users and are not endorsed by nor do they reflect the views or opinions of COLE Publishing, Inc. Comments are moderated before being posted.