Keeping accurate and organised financial records is important for businesses in every sector and of every size. Creating and maintaining systems to keep all your records in check will not only help you minimise the headache that comes at the end of each financial year, but can also allow you to have a clearer picture of the cashflow and financial health of your business, and make better informed decisions about the direction or future of your business. We share some bookkeeping tips to get you started on the right track.
1. Choose the Right System for You
It is still possible to keep track of all the records you need in an old fashioned ledger, but nowadays there are many other more convenient options. A simple physical filing system keeps all your paper records in one place and can easily be categorised by type (receipts, statements, invoices) and by month. Scanning or photographing all paper records and keeping a similar digital back-up on your computer is also advised. An Excel spreadsheet can be set-up to capture and categorise all the necessary information and can generate reports for you, or you could purchase some dedicated accounting software with all this functionality built in.
2. Record EVERYTHING!
Don’t forget to record petty cash transactions, business lunches/coffees and mileage for each work-related trip. Keep additional notebooks in your car or bag or use your smartphone to track these, and enter them into your spreadsheet or software regularly. You can even be super-accurate and log your journeys via GPS.
3. Open a Business Bank Account and Apply for a Company Credit Card
It is vital that your personal and business transactions are kept separate for legal reasons, but this will also help you to make sure that you don’t get into a habit of making small purchases for the business with your own cash, and therefore missing out on the tax deduction. While minor purchases like printer paper here and there may not seem like a big deal in isolation they can really add up over time.
4. Clearly categorise deposits
Make sure any deposits into your company account are clearly recorded, otherwise you risk paying unnecessary tax. For instance if you are giving your business and cash injection from your own savings, you do not want to be taxed on that money as if it is revenue.
5. Know Your Obligations and Set Aside Money For Tax
It is important that you understand which regulations, taxes, thresholds and deadlines relate to your business so that you can be sure you are always complying in a timely manner and not putting your business at risk. Making sure you set money aside each month and keeping track of tax deadlines in a yearly planner means you need never get in trouble with the IRS or receive a late payment penalty.
6. Start Now, and Stay On Top!
If you’re guilty of neglecting any of the above aspects, rectify it now! Get your records up to date tody and schedule a weekly timeslot in your diary to keep it that way. Generating monthly reports ensures you really understand your business – cross-check transaction reports with your bank statements to make sure nothing has been overlooked; check accounts receivable reports to see where you are owed money and who needs chasing; review expense report to judge if all your outgoings were necessary or if they can be curtailed.
7. Know When To Outsource
Bookkeeping isn’t too difficult once you’re set up on the right track but it can be daunting if it is new to you, and it can take some time to learn about all the rules and regulations. Then it also takes ongoing patience and discipline to keep up with the records, and can often mean valuable time away from improving your business and providing your service to customers. More and more small business owners these days are recognising that by outsourcing these tasks to a professional bookkeeping service, it gives peace of mind that the financial aspects are being taken care of by someone who is highly skilled in this area, and frees them up to do what they do best.
If the time is right for you to outsource, or you would like to talk to someone about what we can offer your business, just call the team at Your Virtual Office on 01268 411269!