Running your business and doing what you do I easy right? Well actually yes, it is, if you’re good at making candles and selling them and you love doing it there’s nothing else to worry about it there?
Keeping your books and records up to date isn’t important is it? Erm, it’s probably the MOST important thing you can do for your business. These tips are to help you making the task much easier to stomach when you don’t really want to do it.
1. Be organised
There is nothing worse than facing a whole years’ worth of receipts all in one go and let’s be honest, you’ll put it off and put it off until the day before you need to report income and expenditure to the government and then panic.
Keeping on top of it on a regular basis serves a couple of purposes:
1. Doing small bites is easier to manage
2. You can identify if someone owes you money earlier so you can chase it in
3. You can measure how much you’re spending on certain items and use the knowledge to renegotiate costs etc
2. Separate your personal and business finances
If you are a sole trader there isn’t a legal requirement to have a separate bank account for your business and personal finances BUT it will make your life much easier. Trawling through pages and pages of bank statements and receipts to identify what is business and what is personal is time consuming. By having a different bank account and debit card you can easily identify business receipts in your wallet.
As a Limited company it is a legal requirement to have a separate bank account in the business name as a Limited company is a separate legal entity to its Directors. If there are more than one Director, it might be useful to take note of each debit card number so if there is a receipt missing you know who to chase for it.
3. Consider using cloud software
If you are a little more confident you might want to consider using cloud software to record your income and expenditure, it automates many tedious bookkeeping functions. There are lots of platforms around from Xero, Quickbooks and Sage, ask your network what they use and if they don’t mind ask them to show you how easy it is t use.
4. Save money
Ask yourself these questions before you spend money –
“Do I need this, or do I just want it?”
“Is this wholly and necessarily for my trade?”
If you make it a habit you will save yourself loads of money and time.
5. Schedule each bookkeeping task and stick to it
Need to send invoices to your customers? Put time aside each week and just get it done. The quicker you get yourself in to a routine the easier it becomes. The same for paying your suppliers and reconciling your bank account. Having a routine will help you spot issues like customers who haven’t paid you yet, a supplier increasing their costs without telling you and spending too much on unnecessary items, see no. 4 above. Resolving errors quickly will help you feel more in control.
6. Plan for paying your tax bill
If you get in to the habit of moving some money each month to a separate bank account you’ll be prepared for your tax bill at the end of the year and if you manage to move more than you need it’ll be a small savings pot for you which you can use for something you wanted for the business but didn’t want to commit the money.
7. Use the right accounting method
Deciding which accounting method, you are going to use is imperative before doing anything.
Cash basis – is recording income when you receive it and expenditure when you spend it.
Accrual accounting – is recording income when you send the invoice, even if it’s not paid and expenditure when you receive the invoice but haven’t paid it yet.
8. Find an accountant
Whilst keeping your books and records yourself can be relatively easy there are things you can claim for that you won’t be aware of and a good accountant can make sure you claim correctly and therefore reduce your tax bill. Having an accountant as your adviser will save you more than in costs you and having regular contact with them will keep you on the right track.
Seamount Accounting is a trading name of Seamount Business Services Limited, a family owned accountancy practice based in South Wales covering clients across the UK. They offer bookkeeping, VAT returns, payroll, accounts and taxation on a fixed monthly fee.