Top 10 bookkeeping tips
It is imperative that business owners, regardless of whether they are a sole trader, partnership or a limited company, keep records of their business transactions. But this does not mean you should be bogged down with paperwork. Here are some tips to keep you sane with your bookkeeping:
- Keep your business and personal finances separate
Make sure you have a separate bank account for your business. Mixing the two will make
things very complicated and may cost you more in accountants’ fees to get this separated.
- Have a receipt for everything
Where possible obtain a receipt for every business purchase you make. If you can’t get a receipt for any reason, make a note of the purchase details and the reason why a receipt isn’t available. When entering your expenses into your accounts, make sure each item is categorised correctly, i.e. telephone, rent, stationery etc.
- Petty cash
Where possible, avoid using cash as purchases can be easily forgotten or missed. If you do need to use petty cash, always write notes to put in the box so you have some sort of record and reconcile the cash box daily. Make sure only a limited number of people have access to this to reduce the risk of theft.
- Use an accounting software
There are many different types of software out there, from desktop to cloud based and have packages ranging from the most basic to a more comprehensive one. Although you can keep records on a spreadsheet, it won’t produce the reports that will be useful to you. Speak to your accountant about which would suit your business. They may be using one already and can set you up with a login.
- Keep your records up to date
Set aside some time, around a couple of hours a week to start with, to update your records regularly. Being organised prevents paperwork getting lost. Enter your sales and purchase invoices as soon as possible. Reconcile your bank statement regularly so you know exactly what funds are available and what transactions have taken place.
- Set aside money for the tax bill
Keeping on top of your finances will help you identify when and how much money you owe for VAT (if applicable) and your taxes. It is good practice to put money aside for this every month so you do not ‘accidently’ dip into it for other expenses.
- Review financials monthly
At the end of each month, print out relevant reports from your software to review. The most common reports tend to be an Aged Debtors (to see who still owes you money), an Aged Creditors (to see which bills you still need to pay) and a Profit and Loss account (to see how much money you have made in the month).
‘Turnover is vanity, profit is sanity, cash is reality’! If you do not keep an eye on your cashflow your business could very easily get into trouble. Manage your customers and make sure they’re paying your invoices on time. Ensure you have sufficient funds at the right time to pay your suppliers and tax bills.
- Hand over your books to your accountant on time
Make sure you give your accountant plenty of time to prepare your tax returns and submit your annual accounts. If you are VAT registered you will need to do this quarterly so they can submit a VAT return. HMRC will fine the business owner for late penalties!
- Outsource your bookkeeping
When things get too much, or the thought of having to deal with such a tedious task in the first place gets you worked up, it is best to outsource this. Use a bookkeeper that knows what they are doing. If they have a qualification of some sort you can be assured that they are a professional. Don’t just go for the cheapest – they might not give you the service you need. However, using a bookkeeper can be considerably cheaper than giving your accountant all of your paperwork at year-end.