‘Doing the books’ is often a task dreaded by business owners. The creative, risk-taking traits that entrepreneurs are known for (and excel at) do not always bode well with the meticulous task of organising finances. For some, it is just an overwhelming task, especially if a business owner has little experience with managing books. Here are our top six tips for making the task less daunting.
AVOID MIXING BUSINESS WITH PLEASURE
Separating your business and personal finances is a rule that is worth setting right from the off. Opening a new bank account solely for your business transactions not only makes organising expenses easier it will prevent unnecessarily high-stress levels when the tax deadline rolls around. If you have to search through hundreds of personal transactions to find invoices, tax forms and bookkeeping you will waste lots of precious focus that as a business owner, you cannot afford to lose. Separate your accounts right from the start and save yourself a heap of hassle and time.
KEEP TRACK OF EVERY PAYMENT AND PRACTICE GOOD CREDIT CONTROL
Use your books to track every payment and record when they were made or when the payment was received. This will save you a wealth of time trying to find them if you need to refer to them at a later stage.
It also pays never to be late with payments (especially to HMRC) and make sure you give your clients a payment deadline so you can chase them if needed. Be strict with deadlines as keeping your cash flow healthy is vital. It is a good idea to forecast your cash flow for a full 12 months so that you are constantly prepared, if an issue starts to loom you will be prepared to do something about it. If a client is consistently missing payments and you have issued sufficient warnings, it may be worth considering not working with them again.
EMBRACE ACCOUNTING SOFTWARE
A solid accounting system will allow you to know whether your business is profitable and help you make business decisions such as, buying new assets or expanding your company. Many of the business owners we have the pleasure to meet have never considered using a computer-based accounting system, preferring instead to stick to the old-fashioned way of putting pen to paper and doing their bookkeeping by hand. This is often related to the fear that a lack of bookkeeping knowledge (or no understanding of bookkeeping at all) will be too big an obstacle to overcome. We can confirm that with the right software, this simply isn’t the case.
Accounting software can reduce the hidden times and costs associated with managing a fiancé so don’t be afraid to give it a try, it’s not as scary as you think!
KEEP TRACK OF SPENDING
There are lots of business expenses that you can claim tax back on to reduce your overheads, but you will need receipts to validate your claims from HMRC, so make sure you keep them somewhere safe. It’s a good idea to organise them into different business categories so you can find them all easier. Again, keep business expenses separate from personal expenses, this way you can easily recognise which ones can be claimed against profit to reduce tax.
KNOW YOUR LIMITS AND KNOW WHEN TO ASK FOR HELP
When you first start out in business, it is likely manageable to handle the bookkeeping yourself, but as your business starts to grow you may find yourself needing more help. If you find yourself spending a big chunk of time per week on the books, that is a big chunk of time that you could be putting to use elsewhere. A professional bookkeeper may be able to get the job done in half the time and you will be free to get back to finding new opportunities for your business and looking after customers.