Follow these 10 tips from the start you’ll be able to avoid the most common mistakes by start-ups!
Starting a business is a wonderfully exciting thing, and can help you gain the control over your lifestyle that you longed for while working for someone else. It can also feel pretty daunting – you’re working hard to provide your product or service, but there are so many other things you must keep on top of if your venture is going to be successful. Bookkeeping is one aspect that often gets overlooked or delayed, often because it’s “not my thing”.
1. Set up a business bank account
This is the very first thing you should do after deciding on your company name. Having separate personal and business accounts will keep things much more straightforward throughout the year, but is especially important when it comes to tax-return time. Without designated accounts you will have to spend a great deal of unnecessary time trawling through old statements separating out your business and personal transactions – or you’ll have to pay your accountant to do it!
2. Set up your office space
Once you have chosen your company name and opened your business account, the next step is to set up a designated work space. Working from home sounds great, but is actually much trickier than most people imagine due to the endless potential for distractions, which can lead to mistakes. If renting a space isn’t possible, make sure your office is as quiet and conducive to concentration as possible.
3. Start straight away!
Many people put off even starting on their bookkeeping, leaving receipts and invoices piling up, but all that happens is what started off as a dull yet manageable job becomes a much bigger and more complex task and a source of stress. By starting straight away you can get used to what is involved while the numbers are smaller and more simple, so that by the time your cash-flow picks up you feel confident and on top of things.
4. Use accounting software
Make a habit of using an electronic bookkeeping system from the outset – like most things this takes a little time to set up and familiarise yourself with, but once it is set up and doing all your addition for you, you will be glad that you did. It also means that you can quickly and easily email a copy to your accountant when necessary.
There are many dedicated accounting software packages, but if these are too costly then Excel or Google Docs are great options.
5. Keep (and file!) your purchase receipts
Keeping your receipts not only gives you a clear picture of your business costs throughout the year, but it allows you to claim back the tax on those purchases. By recording every penny your business spends you ensure you only pay what you owe – after all who wants to pay more than they absolutely need to?
6. Pay electronically
The more transactions you can make electronically (by credit card, debit card, bank transfer or direct debit), the easier your bookkeeping will be. Your bank statement will have a record of the date, amount, and payee for each transaction, so you don’t have to remember to manually record this information each time.
7. Keep your bank statements in date order
This is so easy to achieve, and means you can see at a glance whether one is missing, and hopefully reprint or request a replacement in a timely fashion – not right before a tax return or VAT quarter deadline when you will risk a fine if you are late submitting.
8. Number sales invoices sequentially
This allows you to easily keep track of the dates when invoices should be paid, so that you know when outstanding payments need to be chased.
9. Create a simple filing system for unpaid and paid purchase invoices
It is so important to keep track of where you owe money, how much, and when payment is expected. Keep all unpaid purchase invoices in a file, organised alphabetically by supplier. When each one is paid, write the date, amount and method of payment (bank transfer, cheque etc) and move it to another file, which is also organised alphabetically by supplier. This will give you a very clear picture of the recent outgoings, and means you can respond quickly and confidently if there are any queries regarding the payment.
10. Get on top and stay on top!
Bookkeeping only becomes a chore when it’s been overlooked for a while and the work has mounted up. Keep your records up-to-date by ideally doing a little each day – or each week at the very least – and it will always be easy to manage.
This will also mean you always have a clear picture of your business’s finances, and may be able to predict and overcome any cash-flow difficulties.
We hope these tips make it easier, but sometimes it is just easier to outsource your accounts to professionals. Call the team at Your Virtual Office on 01268 411269 to find out how we could help you!