Whether you need finance, retail, or dental consulting having great business bookkeeping is an essential part of running a business. Well-kept accounts can point the way to greater profits by highlighting areas of overspending or undercharging. But they’re also a legal requirement, so there is no escape.
Here are six tips to help you create better, more effective business accounts.
#1 – Always Get Receipts
Receipts are your best friends. They’re your proof that you spent money where you claim it was spent. All receipts are important, right down to the smallest expenses such as bus fares or postage. Over the course of a year, small amounts mount up and can make a dent in your overall tax bill when they’re deducted.
#2 – Keep Personal Finances Separate
No matter how tempting it is to pay business expenses out of personal bank accounts, try to resist. When starting a business from home, sole traders or freelancers are often tempted to mix personal and business accounts because it seems the simpler option. However, at some point (such as when filling in tax returns) business transactions will need weeding out anyway, and it’s a much simpler job when they’re all in their own bank account.
Being able to see at a glance where your business stands financially also makes it easier to set aside tax money. It’s recommended you set aside 25% of all income for tax purposes. At the end of the financial year, you will either have an excess after tax or a much smaller additional amount to find.
#3 – Stick to the Same System
Decide on the method you’ll use for your accounts before you start out in business. You don’t need a complicated system or an expensive accounting computerised package for most simple daily tasks. Be guided by your business model and your accounting needs.
A spreadsheet in Excel in will do the job, and so will a manual accounting system if you like things written on paper. Alternatively, there are inexpensive online accounting packages available on subscriptions that allow you to scale up if and when your business becomes busier or more complex. This resource here can help you to learn more about the types of accounting software that may work best for your business, so if you’re going down this route, be sure to choose the one that is the perfect fit for you and your needs.
#4 – Minimise Your Paper
Too much paper can make simple bookkeeping into something complex, and increase the chances of small but important items getting lost. Receipts are one example. A simple way to digitise them is to make a quick smartphone scan or photograph, then upload the file to a dedicated folder in the cloud. Remember to include a copy of the back as well as the front as this is often where you’ll find terms or other relevant information.
#5 – Backup Your Records
Relying on one copy of business records could prove an expensive mistake in the event of system failure or natural disaster. Even relying solely on cloud storage isn’t advised as there is always the chance of cyber attacks or storage providers going out of business.
For total peace of mind and legal compliance (businesses are required by law to keep records detailing their financial dealings going back at least six years), save everything to an external hard drive dedicated to business.
If you rely on paper records for daily transaction recordings, keep the books from previous years in a location away from your main business office. Fire and flood are not unheard of, and both can destroy paper records beyond restoration.
#6 – Get Professional Help
Many business owners find mundane bookkeeping tasks the least pleasurable aspect of running a business. Some also find it complicated and somewhat daunting.
The services of a professional bookkeeper are invaluable in these instances, and for small business operations won’t require full time hours if you do your part in keeping your receipts etc. organised by type. You’ll also have easily-understood records that your accountant will appreciate when putting together your end of year tax return.
Having a system, updating it daily, and getting professional help if you need it will ensure you keep sparkling accounts that will keep your business in good health.