When you’re running a small business, bookkeeping may be the last thing you want to think about. But the reality is that it needs to be a high priority! Keeping accurate books is vital for accurate financial reporting and is critical should you face an audit.
As your business grows, this may be something you outsource. But when you’re getting started, it’s probably a responsibility that lands squarely with you.
Here are some tips to help you navigate the choppy waters of Bookkeeping for Beginners!
1. Understand that bookkeeping is NOT the same as Accountancy
They’re in the same family, yes, but your bookkeeper is not the same as your accountant. A bookkeeper is responsible for managing the everyday finances of a business, with tasks including (but not limited to):
- Tracking payments in an out of the business
- Making payments and managing payroll
- Chasing payments from clients and customers
- Making sure the business pays the right amount of tax
- Keeping Cashbook, Sales Invoice and Purchase Invoice records
Your accountant is responsible for preparing accounts, budgeting and managing financial information.
2. Keep track of your spending
As you’re probably aware, a business will have a lot of expenses that you can claim tax back on, but if you don’t keep a record of them, you can’t claim anything back. Keep hold of your receipts and make sure they’re organised into the correct categories, as HMRC will need proof that they’re valid expenses.
3. Keep your business and personal finances separate
It can be tempting to pay for everything from one bank account, especially as a small business, but it’s vital to keep your business banking separate. For one thing, when you’re submitting your taxes it’s going to save time if you don’t have to sort through hundreds of personal expenses to separate anything relating to the company from your personal transactions.
4. Embrace technology
As we’ve talked about in a previous blog, the days of keeping your books by hand are long gone! Bookkeeping software and apps have come on leaps and bounds in previous years and will not only save you time, it should also be able to lower your stress levels as you can see everything on a screen in front of you, rather than having to search through pages and pages of double entry.
Ask around to see what would work best for you and spend some time getting to grips with whichever automation you choose.
5. Make monthly reporting a habit
Whilst it might be tempting to bury your head in the sand if you feel like things aren’t going well, that’s exactly the time you need to be on top of your finances, so you can plan for where the business is going.
Producing monthly reports is the best way to maintain a clear overview of your company’s financial health – at the very least you should be including a profit-and-loss report and balance sheet. It will show you exactly how well the business is performing.
6. Know when to ask for help
If you’re spending more time on the books than you are on the business, then it may be time to outsource: it may seem like an unnecessary expense but make sure that doing the books yourself isn’t a false economy.
A professional bookkeeper will take much less time to produce the necessary reports accurately, freeing you up to spend time where it’s really needed – growing the business and expanding your customer base!
If you need advice on your own small business bookkeeping and accounting in general, get in touch today – we’re here to help!