If you’re a small business or perhaps have just started out, the need to keep your finances in order are just the same as if you were a large organisation. Your finances and accounts are the lifeline of your business and determine what you can and cannot do in moving forward. Bookkeeping is essential in order to keep on top of your business and to ensure you’re in the green, not the red.
What can you do to ensure you stay on top of your bookkeeping when you’re a small business? Let’s start with the basics to ensure that you’re running your business professionally…
Make sure you have a business bank account
It can be so easy to start working on your business and automatically put money straight into your personal bank account. However, for ease of monitoring and recording, it will be simpler and more professional (and less intrusive) if you set up a business bank account from the beginning.
Get into the habit of keeping money separate and when or if you are asked to prove anything with HMRC, you have it clearly in a separate business bank account.
Watch where your cash goes
If you’re paid in cash, it can be quite easy to go and spend it on the next stationery item or petty expense that’s needed. But be aware of doing this as small items add up and you could be in a position where you’re not sure where that whole pay check has gone. Keep note of every penny that comes in, whether cash or not, and what it has been spent on.
Record your purchases
As above, this is an important step in knowing what is going out of the business. You’re aware of what comes in as this (should) tally up with your sales invoices, however it can be harder to work out where the money has gone if not recorded correctly. If done on a regular basis, it doesn’t take up much time but indicating whether an expense is personal or business related will determine the amount of tax that you pay. Keep receipts and keep records.
Don’t leave it until the last minute
This is the biggest mistake of a small business – thinking that your bookkeeping won’t take long as you are only small. This is where mistakes are made; records or receipts cannot be found, and reporting becomes rushed or inaccurate. Set aside some time each month to go through your bookkeeping. Keep a box or file accessible for any relevant information to go into which you can collate and record during that month. This will help with stress and looming deadline dates, allowing your business the best outcome.
Save for tax
Many new or small business make the mistake of forgetting that there will be tax bill at the end of the year. Sales come in, bills are paid, wages are taken however sometimes the fact that tax has to be paid doesn’t fall into the equation. Start as you mean to go on and put money aside or allocate a certain amount of funds each month to cover for tax. When the tax bill comes at the end of the year, you will be thankful for doing so.
It’s important for your business that you run it well and efficiently. Gaining advice from an expert can put you on track to being successful or profitable. And an accountant has the expertise to know what’s right or wrong and the right way of doing things. It may cost you slightly more to start with, but it will be worth it in the long run, or you may end up paying more in errors!
If you’re not sure on how to get your bookkeeping started or you’re looking for an accountant that can look after your bookkeeping for you, we’d love to help. Kara Accountants have served the local Hampshire business community for over 20 years and are proud to work with new businesses. Get in touch for a friendly, no-obligation chat.