bookkeeping tips for clients

It’s always a little scary when you start working with a new client. You never know what they’re going to bring in and what their books are going to look like. 

That’s not to say that clients you’ve had for years will have books that are in better shape, but at least you know what to expect. It’s the unknown that’s scary. 

Will they walk in with a shoebox full of receipts? It’s surprising how often this happens in a mostly paperless world. 

Will they bring you a combination of personal and business expenses while asking you to figure it out? This scenario requires a lot of guesswork and back and forth. 

Will they have books that look perfect, but have hidden flaws that are harder to spot? These clients can be the trickiest.

There are several tips you can provide to your clients to help them (and therefore yourself) create better books.

1. Create separate business accounts

This one may seem obvious, but it’s often overlooked by newly formed small businesses. Asking clients to set up business accounts that are only used for business income and expenses makes the books much clearer. 

New businesses often think that they can operate out of existing personal accounts since that’s where they have funds available prior to earning business income. Unfortunately, sorting out personal and business expenses is usually a nightmare later.

Having separate business bank accounts and credit cards that are only used for business expenses avoids guessing at the end of the year.

2. If there’s a question about how to record something, ask it now

Maybe the client doesn’t want to bother you with constant questions, but the reality is that most businesses have expenses that are fairly straightforward and repeat regularly. If a client reaches out to you before recording the first payment, they’ll know how to properly classify all future payments. 

Vehicle expenses are often confusing to clients, especially when it comes to car payments.  Lease payments go to the P&L. A purchased vehicle needs to be added to fixed assets, the loan recorded, and the depreciation recorded. 

While a seasoned accountant can easily make these entries, a client can record these items incorrectly, and cleaning up the entries later often takes longer than spending a couple of minutes to set them on the right path at the beginning.

3. Don’t overlook reconciliation

Even if everything is imported directly from the client’s financial institutions, there are sometimes errors in the import or the accounting file. By performing regular reconciliations, you can ensure that the transactions have been entered into the bank correctly and there weren’t any errors — whether the errors were caused by computers or humans.

Having clients that can successfully complete their own reconciliations will mean that you have cleaner books to work with once you receive them.

4. Once a period is closed, do not go back and change it

Clients often think that going back and changing last year’s books makes them more accurate, and they’re not entirely wrong. But when making some very minor adjustments to the books may make sense to them, it means that you’ll be starting from the wrong point when you’re working on the current period.  

Unless there are some significant changes to the income or expenses (which should not have happened if all expenses are being paid through business accounts and the accounts have been reconciled), the prior periods should not be changed without consulting their CPA or bookkeeper. 

Significant changes may require amending tax returns or updating financial statements and should not be undertaken lightly. 

5. Go paperless

All financial institutions provide PDF versions of statements. By asking for PDF statements, your client will not risk lost mail or missing statements. 

The information is available through their online login and can be retrieved for several years. In the event of an audit, having all the statements saved online ensures that your client will have the backup documentation needed to prove their accounting is accurate and complete.

6. Don’t forget about cash payments

Review the proper way for your clients to record cash receipts. All cash should be deposited into the bank account prior to being spent or transferred to the owner(s). 

Failing to record cash payments can land your client in hot water with the IRS or other taxing authorities. If any cash is spent prior to being deposited, receipts and documents should be carefully maintained to verify the necessity and legitimacy of those expenses.

7. Understand your type of business

The rules are different for corporations versus S-corporations or partnerships. Clients need to understand when taking money out of the business is potentially causing a taxable event.  Some clients get confused and believe they are limited to the salary they are taking and never take a distribution.  

Ensuring that your client understands the different types of transfers to the owner(s) increases the likelihood that the transactions will be classified correctly.

8. Pick the right accounting software

If having historical data is important to you, this is very important. Most accounting software options don’t play nicely with each other and it’s often difficult (if not impossible) to switch accounting platforms further down the road. 

Prior to picking software, the client should consider what their current needs are and their budget, but they should also consider their future needs and goals. Most software packages offer various levels of services that can be ratcheted up as their business expands and their reporting needs grow.  

9. Understand the difference between cash and accrual accounting

One is more straightforward while the other might provide better insight. Which one is right for your client will depend on the nature of the business, government regulations, and the size of the business. 

Making sure that the client understands the difference can be helpful when providing guidance on which one is appropriate for the client’s business.

10. Automate processes whenever possible

Most accounting and bookkeeping software allows for various levels of automation. Some will connect directly with the client’s bank to import transactions while some software allows recurring transactions to minimize repetitive tasks. 

While the time saved by each of this small automation may not be much on their own, the time adds up quickly. Automation can also minimize the number of errors by removing the human element from the equations.

11. Have some understanding of how depreciation works

The rules for depreciation (on a tax basis) change annually, so it’s hard to keep up with the current regulations. 

But having clients that have a basic understanding of the definition of a fixed asset and how depreciation affects their bottom line will help them record the transactions correctly and leave you with less to clean up when you’re closing the books.

12. Leave a buffer in the bank

Even the best bookkeepers occasionally make errors in the books or are unaware of certain transactions that have not affected the bank account yet. Clients should keep a buffer in their bank accounts and not rely solely on the accounting software to tell them what their balance is. 

For example, if they wrote a check or signed a new direct deposit agreement, the transaction may not be entered into the software if no one told the bookkeeper about the transaction.

13. Remember tax deadlines

No one enjoys unexpected large expenses. Taxes often fall under the “large” header, but should never be unexpected. 

Ensure that your clients are well-aware of upcoming deadlines and recurring payments that may impact the business cash flow. Tax payments may include personal income taxes, sales tax, property tax, or other business taxes. 

14. Grant accountant access to your accountant

Allowing your accountant or bookkeeper to have access to your accounting software and bank accounts means that they can monitor your books on a regular basis. Most financial institutions allow separate, view-only access for your accountant or bookkeeper. Most accounting software allows you to grant access to your accountant without paying for another user.  

Additionally, this means that when your accountant is ready to work on your books, they don’t have to hunt you down for statements and information. You can spend your time running your business knowing that your books will be in good order.

15. Outsource bookkeeping

If the books have become too unwieldy for your client to maintain, you should suggest that they outsource the bookkeeping. If your firm does not offer bookkeeping services, you should have referrals for another bookkeeping business ready.  

Business owners, especially new business owners have their plates full juggling operations responsibilities, prospecting, and potentially transitioning from being employees to being employers. By finding someone else who can handle the accounting, the client’s time is freed up for them to focus on their own business.

Next steps

While your client is getting their bookkeeping under control, you should consider implementing a workflow designed for accountants and bookkeepers. Your workflow should include regular check-ins so that you are monitoring the state of your client’s books and can step in if needed.  

There are numerous systems for creating workflows — from simple spreadsheets to comprehensive online systems. Jetpack Workflow has 32 free workflow templates to get you started but also has a workflow management system for a fully integrated workflow experience.

See Jetpack Worflow In Action

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