Often owners put off their bookkeeping because their main priority is to run their business. However, bookkeeping for small business is not as difficult as it may appear. One thing to remember when it comes to bookkeeping no matter the size of the business is to take action right away. The longer you wait the harder and more laborious the task becomes.
In this quick guide we look at the essentials you should consider.
First and foremost you should ensure that you have all the tools of the trade before you start like files and a cash book. It is also good practise to look into appropriate bookkeeping software for small businesses or even virtual assistant bookkeeping services should you need more help at a later date. For more information on bookkeeping software and services see our blogs on how to choose the best small business bookkeeping-software and the benefits of outsourced bookkeeping services.
Cash book management
Your cash book is one of the most important pieces of equipment as it can track the payments that go in and out of any business accounts. However, it is only useful if it is kept up to date. Any payment that comes out of the accounts, from wages to office supplies should be noted down in order to track the company’s outgoings. At the same time it’s just as important to also track income in order to ensure that the books balance.
File your business paperwork
In order to keep track and have evidence to support the information in the cash book it is best to file your business paperwork each month. Starting with your monthly bank statements compare them to invoices both sent and received. By doing this first you will be able to identify any potential errors, missing payments or paperwork for the month. Next file all invoices in chronological order and at the very back of this filing system, for each individual month, store any loose receipts in a plastic pocket. One important thing to remember when it comes to filing all this information is that, any expense in your accounts without the receipt could be disallowed against your profits by the taxman. Correct filing really could save any business, big or small, money.
When it comes to producing sales invoices for your filing it is possible to create and store these with the help of an accounting package. However, if your business is smaller or just starting out then you could manually create invoices via Word or Excel instead. Packages such as Word or Excel come with specific bookkeeping templates that can be constructed with ease for invoices. Again store all your invoices in chronological order, with those that still need to be paid at the front so that you can stay on top of credit and cashflow.
Use a spreadsheet to manage income and outgoings
As already mentioned larger businesses will use an accountancy package to manage their overall book-keeping, but perhaps your business is not large enough to warrant such a package. In this case keeping a simple bookkeeping excel spreadsheet to manage incoming and outgoing finance is perfectly acceptable. This ensures that if any paper documentation does go missing or there is an error when it comes to making the accounts balance, the figures can be supported through the spreadsheet.
By using a spreadsheet, you can keep records for the entire financial year of accounting. This ensures that every month’s financial information can easily be accessed from one source without having to refer to other bookkeeping records.
Don’t mix business with personal expenses
For many business owners, there is a fine line between their business transactions and their personal expenditure but the two should never be mixed. Personal expenses should be kept completely separate from any business expenses. After all, as a director you can’t spend the company’s money on your own purchases, unless they are a legitimate business expense.
Reconcile bank statements
As previously mentioned it goes without saying that every small business should check their bank statements regularly for various reasons. Apart from combating the risk of fraud or a mistake by your bank, it is possible over time to gain a better understanding of where you are spending money. A successful business makes this a habit from day one, which also naturally improves their control on credit and cashflow.
Ideally you should regularly set some time aside, without distractions, to update your accounts. The longer you wait to complete the books the longer and more difficult the task will be.
We hope you found our blog on bookkeeping for a small business useful. If you are short on time to maintain your books or would like to know more about our remote bookkeeping services feel free to call us on 0800 994 9016 or click here to request a free consultation.