This is a guest post by Andi Smiles.
Let’s talk about bookkeeping. You know, that thing you hate because it’s so time-consuming and overwhelming. Yeah – that thing. Here’s how to save time in your bookkeeping through automation.
How to Save Time in Your Bookkeeping Through Automation
What if I told you bookkeeping didn’t have to take all day? What if I told you you could get your bookkeeping done without your brain exploding?
Good news! It’s totally true! You don’t have to spend all day dealing with a bunch of boring numbers. In fact, you can set up your bookkeeping to do most of the work for you so you can kick back with a bottle of wine for a Vampire Diaries binge sesh (don’t judge me).
So how do you design a bookkeeping system with automation? By using what I call, the Pyramid of Automation.
In the Pyramid of Automation, each layer builds off of each other and are ordered by how much time each section takes. The most time-consuming tasks are at the bottom and this is where you’ll start and then work your way up.
Let’s dig into each layer of the pyramid.
Income and Expense Tracking
Income and expense tracking is the foundation of all bookkeeping systems. It’s also THE most time-consuming part of bookkeeping if it isn’t automated.
Income and expense tracking starts by getting your data from your bank account to your bookkeeping system and ends when you assign an income or deduction category to a transaction.
How to automate it: Use a bookkeeping program that syncs with your bank account.
These types of bookkeeping programs download your transactions from your bank automatically and import key data like the date, description, and amount of the transaction. Your only job is to categorize the transaction.
This is a MAJOR game changer because 50% of the work is done for you AND it reduces human error. Oh, plus you’re guaranteed to capture all your tax deductions which means you save money. Your future self is already stoked.
The next level of the pyramid is invoicing which can cost you a lot of time and money if you’re not automating it. Invoicing is billing your clients for your time and, the part most people blow off, tracking who you invoiced, when their payment is due, and if they paid.
Having a strong invoicing system improves your overall cash flow because you get paid on time, every time
How to automate: Setup a digital invoicing system
Does this process sound familiar? You make an invoice in Google Docs. You add up the invoice a hundred times to make sure your math is right. You save it as a PDF. You email it to your client. You remember at some point down the line that you sent an invoice and check to see if it’s past due.
Here’s the process for a digital invoicing system: You create a digital invoice that is calculated for you. You send it to your client via the program. The program keeps a list of open and overdue invoices for easy reference. If an invoice is paid online the program processes the payment and automatically closes the invoice.
Did you notice that you only have to do two things in that entire process?
Yeah – digital invoicing systems for the win!
Tools: QuickBooks Online, Xero, and Wave all offer digital invoicing with a built in payment processor. Freshbooks is another standout digital invoicing program.
In the middle of the pyramid, we have getting paid, which is how you receive money for your products or services. In some cases, this is an invoice, but in others, it’s a sales or checkout page.
A common mistakes business owners make is accepting EVERY payment method out there- checks, Venmo, Stripe, Square, PayPal, Braintree…the list goes on. Automating how you get paid means you juggle fewer payment methods and don’t spend all your time logging into a bunch of payment processors.
How to Automate: Use a payment processor that integrates with your invoicing and bookkeeping software
Seek out payment processors that offer direct integrations with the base of your pyramid. If you’re an invoice based business pick 2-3 payment methods based on what your invoicing software accepts and ONLY use those.
Yes, that means ditching all the other payment methods you accept.
If you don’t invoice, focus on using a payment processor that integrates with your bookkeeping system. Again, only focus on 2-3 payment methods and, if possible, use a payment method that is built into your bookkeeping system.
Tools: Square, by far, has the best integration features with bookkeeping software. PayPal and Stripe can also be synced and QuickBooks has its own payment processing service.
As we get to the top of the pyramid we’re moving into tasks that are less frequent but still could use a bit of automation magic.
Paying others means paying your own bills AND remembering to pay your bills on time. It sucks to get paid late and your vendors will love you forever for paying them on time. Plus, when you have systems in place around paying bills you have more control over your cash flow.
How to automate: Setup your bills on autopay and use the recurring expense feature in your bookkeeping program
This one is a two parter. First, put all your regular bills on autopay. If the vendor doesn’t offer autopay, utilize your bank’s bill pay features for recurring payments. This works wonders if you’re paying off debt and making multiple payments a month.
Then, in your bookkeeping program, use the recurring expenses feature to remind you that your bills are due. The recurring expenses feature automatically enters in a payment BEFORE it is made so you can monitor your cash flow. You’ll see how much cash you’ll have after the bill is paid and know if you have enough to cover it.
Tools: QuickBooks and Xero both have a recurring expense feature for managing your cash flow
Financial self-care is all the stuff your business does to take care of you and itself, like paying you regularly and putting money into savings. Financial self-care is important because it teaches your business to take care of you and prioritize your well-being.
How to automate: Setup automatic transfers and use a savings app
Automate your savings by using a savings app and set up rules to save money automatically. This is the ultimate set it and forget it saving strategy. Some of my favorite rules are “Save 20% of every deposit for taxes” and “Round up change for savings.” You won’t even notice the money going out of your account until you relish in how much you have saved.
When it comes to paying yourself, utilize monthly or bi-monthly automatic transfers. This ensures you get paid on time and helps you manage your personal cash flow.
Remember to start at the base of the pyramid and work your way up for maximum automation magic. For more automation tools, check out my Bookkeeping Automation Resource Guide with even more tips for automating your bookkeeping.
Andi Smiles is a small business financial consultant and coach who helps super rad self-employed women take control of their business finances. She believes that when we create a healthy relationship with our money, we engage with our business, and clients, from a more authentic and empowered place.
She writes about all things self-employed finance at her blog, the BFF course, and is on a mission to take the shame and self-judgment out of managing business finances.