Top tips for Bookkeeping
Running a business can be a daunting task, and one of the most important things to remember is to keep accurate and up-to-date accounting records. To help make this a little easier, here are 15 top bookkeeping tips to help you stay on top of your business’ finances:
1) Separate your personal finance and business
If you are a sole trader legally you don’t need to keep a separate bank account but maintaining a business account will reduce errors and mistakes in your accounting.
If you are trading through a limited company, it is a separate legal entity, and the money is not yours therefore you will need to have a separate bank account and all accounting matters should be kept separate.
2) Up to date documentation
Keeping the business documentation for all transactions is vital. Benefits Include:
- Quick and easy tracking for future queries
- Proof of evidence for what occurred
Most tax departments require businesses to keep their documents that backup their tax claims for a minimum of 5 and often 7 years. These documents include invoices, receipts,
payroll records, etc.
The only way to keep the records is to have well organised filing system.
There are three basic filing options available-
- paper filing system,
- the electronic system on your computer’s hard drive,
- online documentation storage.
3) Perform regular financial check-ups!
If the bookkeeping is not done on a regular basis, then you could end up with overdue invoices and lose track of the transactions. To overcome this, maintain your books on a weekly basis.
4) Regular analysis of the receivables
If customers don’t pay on time, then you’ll face cashflow issues. Chase them for overdue payments. If they have financial difficulties then agree a payment plan with them, at least you’ll get some of what you’re owed.
5) Stay on top of the tax deadlines
To avoid fines and penalties, pay your taxes on time. You can set up reminders on your accounting software or mobile phone, so you never miss a deadline. In addition to the reminders, it’s a good idea to keep aside the money to cover the tax obligations.
6) Try to avoid cash
It’s hard to keep track on cash spending. There are chances that you’re easily forget some of your spending because there are no records of purchases. By using a bank payment method, you can track when and where the spending happened, making it easy to account for.
7) Engaged with cloud accounting software
Maintaining your accounting information on cloud-based software allows easy access to the data whenever needed. Where previously you would have had to sort through piles of paperwork each month, check spreadsheets, and perform manual calculations, etc. Now, technology and cloud-based software does most of the hard work for you.
Accounting software can automatically send invoices to customers on the right due date, track your incoming and outgoing expenses, and generate reports about the financial health of the business.
8) Say goodbye to paper documents
Paper documents are messy and inconvenient. The longer you’re in business, the more storage space you need to accommodate your invoices, bills, and other documents. When you digitize your records, you can save space and synchronize bills, invoices, and receipts with your digitized bookkeeping accounts.
9) Financial agreements
If you take out a bank loan, finance or hire purchase, make sure you keep a copy of the agreement and ensure that they have been recorded on the books and any tax relief is claimed.
10) Keep track of cash payments
Any cash received should be paid into the business bank account or petty cash before spending it. It can be tempting to take the cash right away to purchase stuff, but this might cause a mess in your bookkeeping system.
For example, the bookkeeper/owner might: -
- Forget which customer paid you in cashwhich can lead to an unpleasant situation if you then chase that customer for payment at a later date! It could also appear as tax evasion because the income is not being declared in the system.
- Forget to include the purchase in the books -these expenses need to be recorded into the accounts to help keep your taxes down.
11) When the accounting period is closed, do not go back and change it
Recording transactions or making changes in a closed period can cause you a bit of a headache! The balances in the ledgers and the bank account won’t agree. To avoid these situations never go back and amend the transactions in a prior period.
12) Understand your type of business
The rules are different for limited companies and sole traders or partnerships. Owners of the business need to understand that taking money out of the business potentially causes a taxable event.
Some owners may get confused and believe they are limited to the salary they are taking and therefore never take a dividend to which they are due.
13) Understand the difference between accrual and cash accounting
Cash accounting is more straightforward while the other might provide better insight. Which one is right for the business will depend on the nature itself, government regulations, and the size of the business.
Making sure you understand the difference can be helpful to decide which one is more appropriate for your type of business.
14) Share information where possible
Creating situations in which the bookkeeping system relies on one person creates a single point of failure, which is never advisable.
If you unexpectedly lose a key person who oversees the bookkeeping, then their information disappears with them and as a result the businesses would suffer.
There are many outside trained professionals who can help to give perspective on issues in a business, as well as potential solutions to those issues.
15) Self-Auditing of the work
Consider running a self-audit check to ensure all the bookkeeping transactions are recorded accurately. Go through the entries made and work out if anything is missing.
This will prevent any major discrepancy in the accounting information.
Summary
We consider each business to be unique, and therefore we invite you to contact us and arrange a meeting to discuss your needs, and requirements. There are various engagement types, and we will be able to recommend a suitable engagement based on the size and needs of your business.
For more details and to discuss how bookkeeping can be made easy for your business, with no obligation, check out our website for services we offer.