Bookkeeping essentially means keeping track of all the money coming into and going out of your business. And although it is often seen as the most mundane and laborious of tasks – it is a legal requirement. On this page we offer some tips and advice on basic practices which can help you get on the right track for smooth and cost-effective bookkeeping.
Keeping your business and personal finances separate with separate bank accounts is essential. Doing this from the outset will make things much simpler later on.
You must keep details of all income and outgoings, including receipts and invoices, and make sure any employees do the same. It is worth getting a good system in place early on. Cloud accounting is making this process much easier.
Keep purchase invoices in two piles – one for ‘paid’ and one for ‘unpaid’. Once an invoice has been paid, move it across from one file to the other, writing the date and method of payment on the invoice. Order them alphabetically by supplier name.
Keep your sales invoices numbered sequentially as this will help you to keep track of dates by which they should be paid.
Keep a record of every penny your business spends as even small expenses mount up over time. If you can’t account for them later you will end up paying more tax than you need to.
PAY BY CARD OR TRANSFER
It may seem obvious, but settling bills by credit or debit card or bank transfer will provide you with a permanent record of the transaction, all on your bank statement.
STAY ON TOP
Build bookkeeping tasks into your daily routine. A little bit every day is much easier to handle than a whole month’s receipts piled into a shoe box. It also means you’ll have a much better idea of how your business is performing.
Let the computer do the hard work for you. Electronic bookkeeping systems are much more convenient and reliable than manual records. Cloud accounting has taken this to a whole new level and enables you to work on your books in real time from any device that can connect to the internet.
Slow and late paying customers can harm your business so it’s important to keep an eye on any outstanding invoices and chase when necessary. If you have a regularly late paying customer, you may want to reconsider the credit terms you extend to them.
PLAN FOR THE FUTURE
Note down important dates for potential future bills and expenditure such as VAT, insurances and other payments. Setting aside funds in a separate account is a good habit to get into so that when your tax bill comes there are funds available.
WORKING FROM HOME
Working from home is increasingly popular and has its own benefits. There are also many allowable expenses you can claim towards costs like utility bills, so make sure you inform yourself about these so you can keep the relevant paperwork for tax purposes.
HIRE A BOOKKEEPER!
Of course we would say that, but sometimes it really does pay to get a professional to do the job for you, especially as your business grows and the task becomes even bigger. By outsourcing your bookkeeping, you will have more time to focus on the important job of running a business. Plus, their expert advice will ensure you are claiming everything you are entitled to and there will be someone else who has a valuable overview of your financial situation.