5 Ways to Prevent Bookkeeping Bottlenecks

Many advisors balance their own books or have a staff person with other responsibilities handle the task. Those who take this approach are the first to admit that things get messy over time, especially when client demand is high. The messiness, however, doesn’t go away. It builds, compounds, and can turn into a bottleneck that grinds productivity to a halt.

Here’s five steps you can take to prevent bookkeeping bottlenecks:
 

1. Separate your finances by establishing dedicated business bank and credit card accounts. This will save you a tremendous amount of time when you go to have your taxes prepared and will help you track potential tax deductions and credits. It will also reduce your chances of being flagged for audit by the Internal Revenue Service.
   
   
2. Reconcile the cash balance shown on your balance sheet for both business bank and credit card accounts. If it’s not reconciling, then your balance sheet may be wrong. If you put off regular reconciliation, it makes it more difficult to track down mistakes and discrepancies later on, while also making it tough to judge the health of your practice confidently.
   
   
3. Check the accuracy of your balance sheet. Your balance sheet is a snapshot of your business, so be sure the assets and liabilities listed still exist in your practice. For example, you may have taken a Paycheck Protection Loan during COVID, which has since been forgiven. If so, check to make sure you’re not still carrying it as a liability. With an accurate balance sheet, you confidently engage in tax planning activities with your CPA or tax attorney to ensure your practice is operating at maximum tax efficiency.
   
   
4. Validate your commission statements. At the end of the year, your 1099 is going to match up with the cumulative total of the amounts reflected on your commission statements. The sooner you catch any errors, the easier it will be to reconcile at the end of the year.
   
   
5. Capture and categorize your expenses. Let’s face it. Rarely does a six-month-old receipt conjure perfect recall. Instead, you’re left combing through your calendar, searching for clues about what you did on the day in question. Save yourself the aggravation. Ensure the receipts you’ve accumulated this year have been entered and set aside time to do so regularly moving forward.

Getting through this list can be a daunting task to accomplish, particularly if you don’t have staff dedicated to financial record keeping. Let a seasoned professional help you with your bookkeeping. The good news is that LPL's Bookkeeping Services can help you break through the bottleneck.

^{For financial professional use only. Tracking 1-05368730}