Hot on the heels of taxes in a list of most hated topics for entrepreneurs, comes bookkeeping. For small business owners, it can be frustrating and bewildering in equal measure.
It doesn’t have to be this way! Allow us to give you some fundamental advice — seven simple bookkeeping tips for small business — all of them are easy habits you can pick up to make bookkeeping a lot less painful…
1. Monthly banking reconciliation
We start with this pointer as an absolute must for good bookkeeping. Every month, you must check your books against your bank statements (with no exception, and no relying on automation tools).
If you do this you’ll catch any problems early, before they become a major headache. This includes spotting any unusual transactions or activity.
2. Snap your receipts there and then
Be honest, can you be found under a mountain of paperwork at the end of the tax year? Are you scrabbling around in a frantic blur of sorting receipts?
I’ll move onto that intimidating mound of papers next, but as for your receipts – don’t delay recording them. Virtually everyone has a smartphone with a camera — the solution is right there in your pocket!
Bookkeeping platform such as QuickBooks and Xero provide handy apps for snapping receipts with your smartphone on-the-go.
3. Use the cloud
Still not made it to the cloud? Stuck with those piles of paper? Not only are you missing out on real-time business insight, you’re also spending WAY too much unnecessary time on your books.
Oh, and you’re also on the clock, as the countdown to the Government’s ‘Making Tax Digital’ has begun (April 2019, if you’re wondering).
Not up to speed on Making Tax Digital and what this means for your business? Read our no-nonsense guide.
4. Crystal-clear understanding of allowable expenses
Bookkeeping in the cloud is smart but (for now at least), processing your allowable expenses is still down to you (ergo – you need to get to grips with what is and isn’t allowable).
I know that this is a murky area of business finances, so we’ve made it easy in this blog: Self Employed Expenses – a jargon free guide to what you can claim.
5. Create meaningful reports
Balance sheets aren’t really all that helpful when it comes to the day to day, and month to month of your business. Of far more use is the measurement of your key metrics – such as your gross profit, net profit, net profit margin and who owes you money (aged receivables).
You’ll be able to spot trends and make quick, informed decisions that help you to run a more efficient and profitable business.
6. Know those due dates WELL in advance
Filing dates, invoice due dates, regular bills – the due dates you need to know about are endless – so it makes sense to set up some automated reminders.
Handily enough, I’ve summarised all the tax deadlines you need to know right here: What deadlines should I know about?
7. Processing your tax return WELL before time
Midnight 31st January – does this date fill you with dread? If so, you’re leaving your returns far too late – and you likely face uncertainty as to exactly how much tax you owe (which could leave your business vulnerable).
As the tax year finishes in April, the organised alternative is to file your return not long after, leaving you a clear nine months to prepare for one of your biggest outgoings.
So that’s it, 7 simple bookkeeping tips for small business owners.
Unfortunately, it’s just as easy to pick up bad habits as good ones.
We’ll be looking at these bad habits in an upcoming post, and explaining exactly why you need to give them up — so stay tuned!