Keeping business accounts up to date and orderly is a task some business owners find difficult. Given that the law states you must have records going back at least six years, having a system in place that streamlines your bookkeeping is key to staying on top of the figures.
Save Your Receipts
It’s easy to let receipt control get away from you. Small amount in particular can seem irrelevant in the larger scheme of things, but tot them up over the year and sums can be quite substantial. Even expenses such as bus fares or parking charges need logging, with a cross reference to the receipt included in the books.
Because receipt storage takes up a lot of space, many businesses choose to scan, photograph or copy their paper originals. HMRC will accept digital forms of receipts for many items, so these can be safely stored in the cloud with the paper version disposed of. If you choose this method, here are a couple of tips:
- Highlight the date/payment method/payee before copying, so these details stand out.
- Include the back of the receipt as it’s often here you’ll find terms and conditions or contact details.
Digital copies still need organising carefully:
- Choose how you’ll name files and stick to it.
- Keep a local backup as well as the cloud version.
- Organise files by month, client or category — whichever seems most logical and memorable.
Separate Personal Finances from Business Transactions
Account confusion quickly arises if you start mixing business with pleasure. Make sure all your personal finance records are separate from business ones. They’ll need separating when it comes time to submit your tax return, so starting out that way saves time and money in the long run. Some startups try and avoid business banking until the business is somewhat established, but since most banks allow a grace period before business charges kick in, this is false economy.
Bring in Professional Help
Not everyone is comfortable keeping business financial accounts up to date. Some worry they’re not doing things correctly, some are concerned they’re not claiming all the allowances they could, while others simply find it cumbersome and would rather be doing other business-related tasks. If you fall into any of these categories, seriously consider getting professional help. Bookkeeping and accounting is a legal necessity, so it’s not something you can avoid.
There are two levels of professional accounting help:
- Accountants — take the books prepared by a bookkeeper and use the information to compile tax returns, provide in-depth analysis of business health and have the expertise necessary to offer specific advice. They’ll make sure you’re being as efficient as possible with money, and ensure all your expenses and allowances are correctly claimed.
- Bookkeepers — Maintain finance accounting records on a daily basis, ensuring everything is entered correctly and is balanced.
Bookkeepers can reduce your accountancy fees as accountants can get straight on with their job without needing to put your records in order first.
If you’re new to bookkeeping and want to give it a go, taking a short course can pay dividends and show you how to keep your books as simple as possible without missing out vital information.
Give yourself some peace of mind by setting aside a portion of income throughout the year, ready for your tax bill. The recommended portion is 25%. It may seem like a hefty chunk, but the benefits are two-fold:
- You won’t be worried about how you’re going to afford your tax.
- If your bill is smaller than you thought, you’ll have money left over to either reinvest or put towards the following year’s bill.
Having a savings account that’s just for tax payments helps keep the money a little out of reach if you fear temptation to spend might be an issue.
Take bookkeeping seriously, do a little every day to stop tasks building up, and your books will always be up to date and accurately reflect the financial health of your business.