Running a business is an exciting and potentially lucrative activity, but there are some downsides. One of the big ones is the need to keep accurate and professional books. Accounting isn’t something you can shirk, since as soon as you open your door to paying customers, HMRC wants to know about it and wields some hefty penalties if they catch you out.
That said, once you accept it is part of doing business, it’s not that much of a chore. In fact, it can be invigorating and motivating when you see how your business finances are working and performing, and figure out ways to become even more profitable. Read on for some of the top bookkeeping tips and tricks for self employed and small businesses.
Small business bookkeeping tips and tricks
Many small businesses struggle with the organisation of their finances. This can lead to a number of problems, including being unable to keep track of their accounts and not being able to submit accurate tax returns. The best way to maintain a healthy small business is to have a good understanding of the financial side of the company. Bookkeeping is the process of keeping track of all the financial transactions that a company does. This process can be done manually, by paper or using spreadsheets, but many people find it easier and more efficient to do it with bookkeeping software. It's a vital task, as what happens if you don't do bookkeeping will result in chaos for your small business.
Bookkeeping is a task that can be time-consuming and frustrating. It takes time to manually input transactions and receipts, as well as go through the process of reconciling your accounts. However, there are many benefits to keeping a tidy bookkeeping system. A few of these include:
1) Less stress - Keeping your books in order will help you stay calm and collected when it comes to taxes or other financial concerns.
2) Peace of mind - If you are self-employed or have a small business, you may not have the luxury of hiring an accountant year round. Having an organised system with accurate records will help you feel more confident about your finances when it comes time for tax season or other financial deadlines.
3) More time for work - When you don't have to spend hours every day on bookkeeping tasks, you can put that energy into doing what is most important for your business: working!
There are many software solutions for small businesses out there, but they don't all suit every type of business. Some companies need a comprehensive solution that handles everything from payroll to inventory management while others only need a basic program that just offers basic bookkeeping features.
Small business owners often find themselves juggling many tasks, and bookkeeping can be one of the most time-consuming. However, there are ways to make it easier. In this section, we will explore some of the best ways for small business owners to organise their accountancy to ensure that they are compliant with all relevant legislation.
Bookkeeping tip #1: Keep your business finances separate from personal ones
It’s tempting to run everything for the business from a personal bank account, but in the long run it makes things more complicated. Eventually you’ll have to weed out your business transactions anyway, so opening a business account from the beginning keeps you more organised.
For the first year or so a business account won’t cost you extra, since most banks offer a grace period before charging for transactions. However, if you are self-employed and not a limited company then there's no need to pay for a business account. You can simply open another current account in your own name.
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Bookkeeping tip #2: Have a system
When you’ve got a system, you know what needs doing and when. You don’t spend your precious time head-scratching or wondering where to start. Your exact system isn’t as important as having one in the first place.
1.You could keep a notebook and simply jot down your transactions, including all your purchases, expenses and money earned. Cross-reference your figures to receipts (more on those later) and bank statements, and as long as your business is relatively straightforward, you don’t need much more.
2. Use software like Excel or Google Sheets if you enjoy computer work and understand how these programmes function. There are plenty of guidance websites that will give you an idea of how to set up your pages, but if you’re really stumped a bookkeeper or an accountant could give you some advice on how to keep it efficient and simple.
3. Online accounting software such as Quickbooks or FreeAgent charge a monthly subscription, but you can organise a bank feed so your transactions are automatically imported. Some will also generate reports you can use in your tax return.
Bookkeeping tip #3: Organise your receipts
You need to hang onto all your records, including receipts and invoices for money coming in and going out. Avoid tossing everything in a box if you possibly can.
Organised bookkeeping hacks and methods for storing and labelling receipts include:
- Start a folder for each new month. Inside the folder keep all your receipts and invoices, statements and any other documentation. You could staple your receipts to a sheet of paper to keep them all in order. This is a great idea if you have a lot of paper receipts each month.
- Scan or photograph paper receipts then keep the digital files in a folder on your computer or in the cloud. Make sure you have a naming convention that’s logical and clear so you don’t spend ages searching for a particular entry. HMRC will accept many digital records, but always check before you throw the paper copies away.
- Devise your own numbering system for receipts to make them easier to cross-reference. You don’t have to use the number the issuing company uses. Maybe add the cell number from the transaction on your spreadsheet and the tax year to make it easy to find when needed.
Bookkeeping tip #4: Get professional help when you need it
As the business grows so too do your accounting needs. It gets more complicated, for instance, if you’re also working for an employer and paying tax through PAYE at the same time, or when you take on staff or register for VAT. You may also want to claim a percentage of household utility bills against your tax liability, and need help to calculate what you can claim.
Or perhaps it's simply a task you do not enjoy, or maybe you don't understand it and would rather another person take care of this for you. Professional accountancy help, whether a bookkeeper or accountant, can save you more than they cost, depending on your needs. And you’ll have the peace of mind knowing your accounts are up to date and professionally organised. You'll also be able to reach out to these types of professionals for bookkeeping advice too, so they can be a handy contact to have even if you don't fully pass on all your accounting needs to them.
Hiring an accountant will help you to save on time and money in the long-run. Accountants can also help you with your taxes, payroll, and other tasks related to running a business. If you are self-employed or running a small business, hiring an accountant can be crucial for your success as your business grows.
It can be time-consuming enough to run a business and stay up to date with all the changes in your niche, let alone understand the ever-evolving world of tax and accountancy. By hiring a professional accountant they will be up-to-date with all the changes that could affect your specific business, and be able to recommend what is best for you when it comes to taxes, allowable expenses and other tax-related issues. They may even be a member of an accountancy organisation or network. Accountancy organisation benefits include your accountant being up-to-date with the latest available accountancy software to streamline your bookkeeping tasks, being compliant with local laws, gaining up-to-date knowledge of the industry and any changes that could affect your business and networking with other professionals in their field; a lot of tasks that could take too much time for yourself as a small business owner.
Hiring an accountant will help you to save time, stress and energy on accounting tasks that you don't have the expertise for, such as:
- Keeping track of your income and expenses
- Dealing with tax issues
- Managing your company's finances
- Helping with payroll
- Completing your tax returns
- Saving money through their tax and expenses knowledge
Final word on bookeeping tips for your small business
We sometimes tend to dramatise bookkeeping, but it’s not such a dark art. As soon as you make a start and see the figures grow and make sense, it can become a rewarding exercise in its own right.
With these small business bookkeeping tips, you can keep your accounting records up-to-date and on top of your finances. If you don't have time to do your bookkeeper tasks yourself, then it's always a job you can outsource.
If you're finding bookkeeping is taking you away from increasing revenue, then it could be a way to save money in your business by letting a professional do it and freeing up your valuable time so you can focus on other tasks.
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Originally posted in 2018 and updated in 2022.