Accounting can feel daunting, especially when you haven’t had a chance to look at your books in awhile. However, 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.
What is bookkeeping and why is it important?
Bookkeeping is the process of recording real world events in your business that affect its finances. In other words, 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 appropriate amount of taxes to be paid, understand how profitable your business is, and how much you can afford to spend on things like equipment or employees.
What steps do I need to follow to use Wave correctly?
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 way to do this is by connecting your bank and credit card accounts. This is the fastest way to keep track of any money flowing into and out of your business, because bank transactions are automatically updated in Wave.
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 your business has a clear digital paper trail. Find out more here.
- Compare the transactions in Wave with the transactions in your bank account and credit cards by performing a Bank Reconciliation. By reconciling your accounts, you can feel confident in your records, as they reflect the reality of your business’s finances and support claims made on your tax forms. At tax time, having reconciled accounts ensures that you haven’t double counted your income, or missed any deductions, and most importantly that your records are complete.
My books are in order - where do I go from here?
Now 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 just making more empowered decisions for your business. With your books organized and fully under control, you can get back to doing what’s most important - running 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.
With the steps above you should be well on your way to keeping your books in a great place. If you want to dig in further, 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 in our Help Centre.
- To learn more about Wave’s auto-categorization feature, check out this article!
- Need a little extra help with reconciliation? We have an 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 also has checklists (available on pages 111-113) for daily/weekly, monthly, and yearly accounting tasks for maintaining your books.