Small business bookkeeping is regularly listed as one of the biggest headaches facing the self-employed. Unless you’re an accountant, it’s unlikely to be your passion for numbers that led to you setting up your own business. Business bookkeeping can’t be avoided however, so finding ways to better manage your books can make a real difference to your working life and overall efficiency.
In no particular order, here’s our top ten tips to help keep your business bookkeeping stress-free.
1.Keep your personal and business finances separate
It sounds obvious, but you should always try to keep a strict divide between your personal and business finances. Many people drift into self-employment over time, setting up part-time businesses or taking on extra work on the side. Having separate business bank accounts doesn’t always feel like a priority early on. As the business grows it can then be more difficult to extricate business finances from personal ones. Even if you’re only running a part-time small business to earn extra income you should open a separate business bank account and get a business credit card. Make sure you always properly record your business expenses.
2. Investigate online bookkeeping
Using cloud-based software you can easily adopt online bookkeeping. It can save an awful lot of time and energy, syncing your bookkeeping software like Xero or FreeAgent with your business bank accounts. You can always have up to date records and your critical financial data is automatically backed up.
3. Master the lingo
You don’t have to become fluent in the more arcane aspects of financial terminology but understanding the basic terms will make things much simpler. Try to get up to speed with basic bookkeeping and accounting terms such as liability, asset, revenue, etc. Don’t be embarrassed if you don’t know some of the more technical terms. You’ll pick those up naturally over time.
4. Keep hold of important bookkeeping records.
Every time you or your staff get a receipt or an invoice it’s important that it’s kept and stored correctly. Keep hold of your bank statements, cheques, receipts, invoices, deposit slips, bills, tax returns, etc. safely. You should scan and save everything for at least six years, because you never know when you may need to refer back to them or if they will be requested by HMRC.
5. Filing and invoicing
Always keep incoming sales payments and invoices separate. Sales invoices should always be raised and filed in a sequential order. There’s a number of different ways to file purchases but keep everything thorough and logical and you won’t go far wrong.
6. Keep up to date
As with so many things in life, the best way to manage your small business bookkeeping is do it little and often. Keeping up to date with your books and making it a regular part of your working week will save you a lot of hassle further down the line. Staying organised reduces the risk of paperwork being lost. Reconcile your bank accounts on at least a monthly basis to ensure every item has been accounted for.
7. Keep track of petty cash
Many business owners, particular in the early days, can be nonchalant about their petty cash. Every time you dip into the petty cash, even if it’s just to pay for a stamp, you should keep a record of the amount being spent. You should reconcile your petty cash regularly, perhaps once a week, to ensure that there aren’t any inconsistencies. This helps you keep track of where your money is going and helps prevent theft.
8. Keep your accounting statements up to date
Issuing invoices is one thing, but they don’t count for anything until they are paid. That’s why it’s important to accurately track cashflow. It’s the lifeblood of your business so keeping the payments coming in is important. It’s easy be so busy with work that you forget to chase up payments, but the bills keep arriving. Keep an eye on your invoices and have a regular day of the week to chase up unpaid ones. The future of your business really could count on it.
9. Be prepared for emergencies
As well as keeping track of invoices and cashflow, one of the surest ways to fireproof your business against future shock is to build up an emergency fund. Surprise bills and sudden expenses can completely derail the best laid financial plans, and in some cases can even endanger the future of an otherwise viable business.
Open a separate savings account purely for business emergencies. This should give you enough money to manage your business for a few months if you’re unable to work. Your emergency fund should also be there if you have a sudden expense. If you’ve unpaid bills that are waiting on invoices being settled, the last thing you need is a computer breakdown. If you have emergency funds you can easily cover unexpected expenses. This means you’re less likely to be forced to go into debt to try and keep your business trading.
10. Consider hiring a bookkeeping or accountancy professional for small businesses
If you’re keeping business books for the first time, and perhaps trying to get your head around different software, you’re likely to make mistakes. These are all but inevitable when you’re a novice and, in most cases, will be of little consequence. There are mistakes you can make however, that can have a serious knock-on effect with your business record keeping. Putting them right can be costly in terms of time, and sometimes money.
Most accounting software packages come with some form of support, but most of these are of the operational and technical kind. They can tell you how to keep the software running, but they’re unlikely to tell you how to manage your business accounts.
One Click Accountant provides online bookkeeping services to small businesses which gives tailored support to business owners in managing their taxes and accounts. An online bookkeeping service can give you greater clarity on your business finances, helping you to better manage your business cashflow as well as free up your time.
Bookkeeping can be a chore, but it doesn’t have to be a huge distraction. Outsource specific financial tasks to a accounting or bookkeeping professional who is experienced in handling business accounts.
