8 Bookkeeping Tips for Small Businesses

By Nick Green for Unbiased

1. Keep records of every payment

Use your books to track every payment and make it clear when they were made or received so you can easily find them if you need to refer to them later.

2. Choose an accounting method

Your bookkeeping will underpin your accounting, so decide at the start which method you will use. Traditional accounting records income and expenses at the date of the invoice.

Your bookkeeping will underpin your accounting, so decide at the start which method you will use. Traditional accounting records income and expenses at the date of the invoice.

Cash accounting records them on the date when you actually receive or pay the money. It reduces the risk of having to pay tax on money you haven’t yet received but is only available if your turnover is $150,000 or less.

3. Be strict with deadlines

Never make late payments (especially to HMRC) and give your clients a payment deadline so you can chase them effectively. Take note of any late payers and consider not working with them if they keep missing payments. This is called credit control, and the aim is to keep your cash flow healthy.

4. Keep track of expenses

You can claim tax back from lots of  business expenses to reduce your overheads. You’ll need receipts to substantiate your claims from HMRC, so keep them stored somewhere safe and organised in different business categories.

Be sure to keep business expenses separate from personal ones, so you can easily identify which ones can be claimed against profit to reduce tax.

5. File bank statements and invoices in order

Or, don’t waste your bookkeeper’s time and your money. Make sure all bank statements and invoices (purchase and sales) are present and correct, and in date order. Otherwise you’ll be paying your bookkeeper for the time taken chasing down and sorting these documents, when it’s easy to do yourself. Worse, if documents go missing, then you could end up facing a fine for late filing.

For purchase invoices (i.e. money that you owe), keep separate files for paid and unpaid invoices, and file both alphabetically by supplier name. Always remember to move invoices over once you’ve paid them. For sales invoices (i.e. money owed to you), number them sequentially in order of when they should be paid, so that you can chase them effectively.

6. Choose suitable software

You may not need specialist bookeeping software as it might be done with Microsoft Excel or its freeware equivalents. However, as your business needs grow, you may want a more specialist package. Contact RSG Accounting Services for a FREE consultation to determine  the best bookkeeping software for a small business.

7. Produce monthly reports

Generating reports at least once a month is the surest way to stay on top of your business finances, and ensure you don’t get caught out by nasty surprises. Your monthly reports should include a profit and loss statement, and the balance sheet, as a minimum. These reports provide ongoing insights into the performance of your business and help you track its financial health.

8. Know when to outsource your bookkeeping

If your business starts small, it may make sense to handle the bookkeeping yourself. As you grow, keep track of how much time per week you spend on the books. Work out the monetary value of your own time (e.g. how much you generate for the business per hour) and compare this with the cost of a bookkeeper. A professional bookkeeper may take only a couple of hours to handle a month’s accounts, so it won’t be long before this is better value.

Which is more important – bookkeeper or accountant?

For a small business, finding a bookkeeper may initially be more urgent than having an accountant. However, in most cases it’s not an either-or decision. If you outsource your accounting function, bookkeeping and payroll can usually be included as part of the service.

Having a comprehensive finance function can put your mind at rest, save you time, and enable your business to grow as fast as you want it to. CONTACT RSG TODAY TO HELP YOU GET STARTED!