Expenses & Workflow

How to Create a Perfect Bookkeeping Process Flow?

by Envoice
13 min read

Are you struggling to keep track of your finances? Are you looking for a better way to organize your bookkeeping process? If so, you’re in luck! This blog post will discuss how to create a perfect bookkeeping process flow.

If you are a business owner, you know that bookkeeping is essential for your success. (1) But creating and implementing a perfect bookkeeping process flow can be difficult. Bookkeepers use many different tips and tricks to make the process smoother.

The whole bookkeeping process is filled with tiny details that can make a big difference. Understanding this, and taking the time to create a perfect bookkeeping process flow, can save you a lot of headaches down the road.

Understanding the bookkeeping process

Before perfecting the bookkeeping process flow, you need to understand the process itself. Bookkeeping is the process of recording, storing, and retrieving financial transactions. This information is used to make decisions about how to manage your finances.

The bookkeeping process involves several steps, namely;

Recording transactions

The first step is recording all financial transactions in a journal or ledger. Transactions, as you know, are any time money changes hands. 

Recording transactions can happen in one of two ways: manually or electronically. If you choose to do it manually, you will need to use a ledger book. This is a physical book where you record all transactions by date.

If you opt for electronic recording, you can use accounting software like QuickBooks or Xero. These platforms make it easy to track and categorize your expenses.

Classifying transactions

After all, transactions have been recorded; they need to be classified. This is where you will decide to which account each transaction belongs. For example, if you purchased at the grocery store, that transaction would need to be classified as an expense.

There are two types of accounts: income and expense. All transactions will fall into one of these categories. Income is the money coming into your business. Expenses are the money going out of your business.


Reconciling is the process of comparing your records to your bank statements. This is important because it helps you catch any errors in your bookkeeping.

For example, let’s say you have a credit card transaction for $100 that you don’t remember making. When you compare your records to your bank statement, you will see that charge and can investigate further.

Preparing financial statements

The final step is to prepare financial statements. Financial statements show your business’s overall financial health. They include your income statement, balance sheet, and cash flow statement.

Close up photo of accounting documents

You will need to prepare financial statements at the end of each month, quarter, and year. It gives you a clear picture of your business’s finances and helps you make informed decisions about where to allocate your resources.

The law requires public companies to prepare and publish financial statements. For private companies, it’s not required, but it’s still a good idea to do it.


An audit will be done when all financial statements, balance sheets, income statements, and cash flow statements have been prepared.

An audit is an independent examination of your financial statements. It’s done to ensure that your statements are accurate and free from material misstatement.

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There are two types of audits: internal and external. Employees do internal audits within your company. An independent accounting firm does external audits.

The most important thing to remember about the bookkeeping process is that it’s all about accuracy and detail.

Creating a perfect bookkeeping process flow

Grey and black laptop

Now that you understand the basics of the bookkeeping process, let’s talk about how to create a perfect process flow. Creating a perfect bookkeeping process flow makes it as simple and efficient as possible.

Here is your action guide to making the perfect bookkeeping process;

Have all the records

Records are everything when it comes to bookkeeping. You need to ensure that you have all the necessary records before starting the process. It includes things like bank statements, receipts, and invoices.

You can get most of these records electronically from your bank or accounting software. If you are missing any physical documents, reach out to the vendor or customer and ask for a copy.

Create a system

The next step is to create a system for bookkeeping. This system will help you keep track of your financial transactions and make sure nothing falls through the cracks.

You need to clarify whether your small business will use cash-based or accrual accounting.

With cash-based accounting, you only record transactions when the money changes hands. It’s the most straightforward method and works well for small businesses with simple financials.

With accrual accounting, you record transactions when they happen, even if the money doesn’t change hands until later. This method is more complex, but it gives you a more accurate picture of your business’s financial health.

The accounting system you choose will form the basis of your bookkeeping process flow.

[Related Post: Incurred vs. Accrued in Accounting – Main Differences and Examples]

Set up a chart of accounts

The next step is to set up a chart of accounts. This is a list of all the accounts you will use to classify your transactions.

Creating the correct chart of accounts is important because it will affect how easy or difficult your bookkeeping process is.

For example, it will be hard to keep track of everything if you have too many accounts. On the other hand, if you have too few accounts, you won’t be able to get a clear picture of your business’s finances.

The best way to set up your chart of accounts is to use accounting software. This way, you can ensure that everything is set up correctly, and you won’t have to do it manually.

Keep your records organized from the start

Remember the saying that things don’t go wrong; they go right into the wrong place? It is especially true for bookkeeping.

If your records are a mess, it will be tough to find anything, and you will waste a lot of time looking for things lost in the shuffle.

The best way to avoid this is to keep your records organized. Create a system for recording and storing transactions that work for you and stick to it.

If you’re manually recording transactions, use a ledger book. Create folders for each account and subaccount if you’re using accounting software.

Whatever system you choose, make sure it’s one you can easily maintain. The last thing you want is to spend more time organizing your records than actually recording transactions.

Use accounting software

One of the best ways to make the bookkeeping process flow more efficiently is to use accounting software. Accounting software like QuickBooks and Xero can automate many of the tasks that are traditionally done manually.

For example, most accounting software can automatically import bank statements and credit card transactions. This can save you a lot of time that would otherwise be spent manually recording transactions.

In addition, accounting software can help you categorize transactions and prepare financial statements. This can all be done with just a few clicks of a button, saving you hours each month.

Add ons are a gem

Technology is constantly evolving, and there are always new products and services being developed to make our lives easier.

This is also true for the bookkeeping process flow. Several add-ons can be used with accounting software to automate tasks and save time.

For example, many receipt scanning apps can be used to scan and store receipts automatically. This can be a huge time saver if you have a lot of expenses.

One such add-on is Envoice, a SmartRecord program designed to extract information from receipts and invoices. All it takes is a picture of the document, and Envoice does the rest.

Another add-on that can be used to automate the bookkeeping process is Bill.com. Bill.com allows you to create and send invoices, track payments, and manage expenses all in one place.

Use professional help

It’s okay to do your bookkeeping, especially if you understand the double-entry bookkeeping system and have experience with it. But if you find that you don’t have the time or the skills to do it yourself, there’s no shame in outsourcing this task to a professional.

A bookkeeper or accountant can take care of all the tasks associated with bookkeeping, from recording transactions to preparing financial statements. This will free up your time to focus on running your business.

When choosing a professional, be sure to interview a few and ask for references. You want to make sure you’re working with someone who is qualified and who you can trust.

Choose automation

Gone are the days when bookkeeping was a time-consuming, manual process. There are several ways to automate the bookkeeping process flow with today’s technology.

Using accounting software and add-ons can save you hours each month. Take, for instance, Envoice; it has coding automation that takes out a lot of the tedious work for you. It makes you ditch manual recording and speeds up your work by automating the bookkeeping process.

Thanks to automation, what used to take days can now be done in just a few hours. So if you’re looking to save time and make your life easier, consider automating your bookkeeping process flow.

Clearly define the roles

Overlapping roles and unclear expectations can lead to frustration on both sides. To avoid this, it’s essential to have a clear understanding of who is responsible for what.

The business owner should be responsible for providing the bookkeeper with all the necessary documentation, such as receipts, invoices, and bank statements.

The bookkeeper should be responsible for recording transactions, preparing financial statements, and filing taxes.

By clearly defining the roles, you can avoid confusion and ensure everyone is on the same page.

Regular communication

Last but not least, it’s important to communicate often with your bookkeeper or accountant. If you have any questions about the bookkeeping process flow or your financial statements, ask.

It’s also good to schedule regular meetings to go over your financials and ensure that everything is on track. By communicating often, you can avoid any surprises down the road.

[Related Post: Accountant Not Responding? – What to Do About It?]

Why creating the perfect bookkeeping process is key

The success of most, if not all, small businesses hinges on many factors, but one that is commonly overlooked is the bookkeeping process.

Bookkeeping helps you track your income and expenses, understand your financial situation, and make sound business decisions. In other words, it’s the key to a successful business.

Below are the benefits that small business owners can reap from having an effective bookkeeping system:

It helps you make informed business decisions

Accountant counting cash while making notes in a notebook

Remove the guesswork from your bookkeeping by having accurate and up-to-date financial information at your fingertips. This will enable you to make sound business decisions based on facts and not emotions.

Ensures compliance with the law

Failing to comply with tax laws can result in hefty penalties. By keeping accurate records of your income and expenses, you can ensure that you’re complying with the law. It enables you to prepare and file taxes on time.

As a small business owner, the last thing you want is to be hit with a hefty fine because you failed to comply with the law.

Saves you money

An effective bookkeeping system can save you a lot of money in the long run. By keeping track of your finances, you can identify areas where you’re spending too much and make changes accordingly. This will help you save money and improve your bottom line.

Improves cash flow

By understanding your financial situation, you can better manage your cash flow. This is especially important for small businesses that often have tight budgets. Imagine the hassle a bookkeeper goes through if they miss an invoice or payment! The payments will not be made in time, reflecting poorly on the company’s cash flow.

If you want to avoid this, you need to have an effective bookkeeping system.

Creates a good impression with investors and lenders

If you’re not sure where to start, we suggest hiring a bookkeeper or an accountant. They will be able to help you set up your system and ensure that it’s running smoothly.

Investors and lenders are more likely to fund your business if they see that you have a well-organized bookkeeping system. This shows them that you’re serious about your business and capable of managing your finances.

Keeps track of your business performance

Real-time reporting is only possible if you have an effective bookkeeping system. This will allow you to track your business performance and see where you need to improve.

By understanding your financial situation, you can make better decisions about growing your business. Do you need to invest in new equipment? Are you spending too much on marketing? An effective bookkeeping system will help you answer these questions.

It helps you track expenses and control costs

Ever felt that your small business is hemorrhaging money? It’s a common problem, but it can be avoided by keeping track of your expenses.

With an effective bookkeeping system, you can see where your money is going. This will help you control your costs and save money in the long run.

Minimizes fraud

Fraud is such a menace in the business world. In the US alone, it’s predicted that businesses lose up to 5% of their gross revenue to fraud. (2)

You can minimize the risk of fraud by keeping accurate records of your income and expenses. It will help you catch any suspicious activity quickly and prevent it from causing too much damage.

With the help of tools like Envoice, you can create an audit trail that will make it easier to catch fraudsters. Everyone who has access to the records will have to log in, and this will create a paper trail that can be used to track down the culprit.

There are many benefits of having an effective bookkeeping system. As you can see, it’s not just about keeping track of your finances. An effective bookkeeping system can help you save money, comply with the law, and make better business decisions.

Parting shot

Creating a perfect bookkeeping process flow can be daunting, but it doesn’t have to be. Understanding your business needs and finding the right tools will help you set up a system that works for you.

The bottom line is this: if you want your business to be successful, you need to have a well-organized and efficient bookkeeping process flow. Creating an effective bookkeeping system is vital for any business owner. It can help you save money, comply with the law, and make better business decisions.

While it may seem like a lot of work, the benefits outweigh the costs. By taking the time to create a perfect bookkeeping process flow, you’re setting your business up for success. 


Article Sources:

  1. https://www.investopedia.com
  2. https://businessfraudprevention.org


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