We all know that some habits are bad for us. But, when it comes to bookkeeping and your small business, it’s not always easy to spot bad habits before it’s too late. If you don’t stop them soon, you’ll be left with a mess, and a stressful one at that. It will cost you time, and money.
So, following our list of great bookkeeping habits for small business owners, I’ve put together a list of the bad ones that you need to ditch, and pronto!
1. Doing it all yourself
I know, I know, I’m an accountant, so I would say that, right? Well unless you’re one of those strange breed of business owners that loves slaving over the books, outsourcing will be a weight lifted.
This doesn’t meen you should wash your hands of the books, far from it. In fact, you should still be invested in the process – reviewing reports, viewing live sales figures and asking questions of your bookkeeper can help you make the right business decisions. Passing on the legwork will allow you to look at the bigger picture.
2. Petty cash nonchalance
No idea how to track petty cash? Purchasing in a rush and mixing up personal and business money? It’s all too easy, but it can cost your personal purse when buying what should be an allowable business expense.
Buy a lock box and use it (religiously). You need a system for tracking the incoming and outgoings, as well as the reimbursable expenses.
It’s all too easy to write-off small cash expenses (those plastic wallets for your filing; the printer ink cartridge; a coffee and slice of cake at a meeting), but they all add up!
3. Poor communication between your business and your bookkeeper
Have a bookkeeper? If yes, then great! You’ve already realised the potential benefits. But, does that bookkeeper speak with you and your people regularly? If not, then it’s not so great.
Bookkeepers will serve you best when they know what’s going on in your business, when and why – so, keep regular communication open.
4. A disorganised filing system
As a small business owner, you’ll appreciate the importance of being organised when it comes to your time and day-to-day tasks. If you don’t give your bookkeeping the same level of attention, it’ll lead to problems further down the road.
If you’ve got a desk strewn with paperwork, or your wallet barely fits in your pocket because it’s stuffed with receipts, why not consider moving towards a paperless system? You could use a scanner, your phone, or invest in some software to help you out.
5. Ignoring or forgetting deadlines
On top of being disorganised with paperwork, do you know all the important due dates? When are your invoices due? When do you need to submit your tax return?
Due dates are an important part of bookkeeping. If you aren’t on top of payments due in, or out, cash flow will be affected. Even worse, if you miss an HMRC deadline, you could face a penalty.
Keep track of deadlines and due dates in a way that works for you, whether it’s on paper, or on screen. Set reminders and make sure you don’t get caught out.
6. Cutting corners
Some things are worth investing in more than others. Bookkeeping is one of them. Getting a professional in to help can really make a big difference to your business.
Nonetheless, as with most things in business, you get what you pay for. Outsourcing to cheap bookkeeping services might do more harm than good. By engaging the services of a good accountant, you can expect a better service, but most importantly, you’ll be getting someone who knows what they are doing. In bookkeeping, mistakes can be costly.
7. Ignoring key metrics
Bookkeeping isn’t just about staying on the right side of HMRC. It should be providing you with up-to-date reports and key business metrics.
If you don’t know how your cash flow looks for the next month, or have no idea what your gross profit margin is, then you might need some help. This information should be influencing your decisions as a business owner – whether your prices are right; what your budget is for the next year; and how you should be prioritising your time.
Were you nodding along as you read these? If any of them apply, then it might be time to ditch those bad habits and make a change.
Thankfully, and in case you missed it, we’ve already prepared a list of great bookkeeping habits you should pick up instead!