With Wave, it only takes 3 simple actions to get your books in order: import your transactions, categorize them, and reconcile your bank accounts.
Ensuring your books are accurate is essential when it comes to applying for loans and other forms of relief related to loss of income due to COVID-19.
The importance of bookkeeping
Bookkeeping is the process of recording real world events in your business that impact finances. Every time you create an invoice, your customer pays you, you receive money from a loan, or you pay for a business expense, a financial event has occurred in your business that you need to record!
By having accurate records, you can create reports that reveal powerful insights that help you determine the amount of taxes to be paid; understand how profitable your business is; or how much you can afford to spend on things like equipment or employees.
Simple steps for bookkeeping
Wave is designed to make your bookkeeping quick and easy, but accounting software is not something you can simply set and forget. You will need to take three key actions regularly to ensure you have accurate, trustworthy reports:
Ensure all your business transactions are in Wave. The simplest and fastest way to do this is by connecting your bank and credit card accounts.
You can also add transactions using the following methods:
- Categorize your transactions in Wave. By categorizing your transactions, you are giving a basic explanation of why you received money, or why you spent money. This ensures your reports are meaningful, and that you have clear digital paper trail. Learn more here.
- Reconcile by comparing the transactions in Wave with the transactions in your bank account and credit card. By reconciling your accounts, you can be confident that your records reflect the reality of your business’s finances and support the claims you make on your tax forms.
With your books in order you can access all of your reports with confidence. This might mean having financial statements to apply for a business loan, or to file your income taxes, or make more empowered decisions for your business.
Wave recommends that you have your business transactions going through business-only bank accounts and credit cards. Using your personal bank account for business transactions means an extra step of always deciding if the transaction is for the business, or is personal, which can add unnecessary complexity to managing your business.
If you want to dig in further to the three steps outlined above, we have some suggestions below:
- For a step-by-step breakdown and more guidance on how to complete these 3 steps, please see our Accounting made easy guide.
- For more in depth guides and how-tos on everything from loans to reconciliation, checkout our Accounting and Bank Connection and Transaction Import articles.
- To learn more about Wave’s auto-categorization feature, check out this article!
- To take a deeper look at how to reconcile, check out article for that as well.
- Our Fearless Accounting guide is a great primer on the ins and outs of accounting - whether you are a seasoned veteran bookkeeper or just getting started.
- Our Fearless Accounting guide has checklists (available on pages 111-113) for daily/weekly, monthly, and yearly accounting tasks for maintaining your books.