It’s a familiar question for self-employed business owners to ask me about how they can stay on top of business bookkeeping. As it’s one of the least riveting aspects for most people of running a business, entrepreneurs often get behind with their bookkeeping basics. Therefore, many of you find it difficult to achieve results in your business accounting and find the whole process a tedious chore.
However, the good news is that by implementing some key practices, it’s not as boring as it might first appear! If you’re one of those people who have let your bookkeeping tasks slide, help is at hand. In this article, I’ll talk you through what bookkeeping is and how to do it so you have peace of mind you’re doing it right.
Friendly Disclaimer: Whilst I am an accountant, I’m not your accountant. The information in this article is legally correct but it is for guidance and information purposes only. Everyone’s situation is different and unique so you’ll need to use your own best judgement when applying the advice that I give to your situation. If you are unsure or have a question be sure to contact a qualified professional because mistakes can result in penalties.
What is Bookkeeping?
Whether you love or hate bookkeeping, it’s an essential process of running any business finances. Essentially, it involves tracking all of a business’ financial transactions. Elements include business expenses, sales, bills and other cash flow data which are all needed to keep your books in order and make your business a success. By keeping your bookkeeping basics up-to-date you can see exactly where you’re spending your money, how much tax you’re paying and assess future investments and operations. Having a regular schedule will also help you recognise any trends, such as marketing and advertising statistics.
1. Schedule Regular Times
First things first, if you want to stay on top of bookkeeping basics, you need to set a fixed time, either daily or weekly, depending on your business. If you’re already behind, set aside extra time and catch up. There’s no point putting it off indefinitely so get yourself organised and tackle it head on. Spend time updating your books by tracking your income and expenses and paying any bills. Additionally, getting into a regular bookkeeping habit will also give you valuable insight into the financial health of the running of your business.
2. Find a Bookkeeping System
There are numerous bookkeeping solutions to help you make your job easier. Firstly, you can keep everything updated using a bookkeeping spreadsheet. I’ve designed this easy to use spreadsheet to help you track your income, expenses and taxes so you’ll be ready to fill in your self-assessment tax return. Plus, it can be customised for your own business expenditure and automatically calculates your entries.
You can also use bookkeeping software, such as Xero or Quickbooks, in combination with a spreadsheet. These types of bookkeeping tools are a powerful way to organise all your finances. If you decide to use cloud software for accounts, be aware it might take time to get the hang of using them. However, once you get to grips with it, you’ll soon be doing your bookkeeping like a pro. Alternatively, you can employ an accountant to help you. If you do this, then you’ll still need to keep track of your business accounts to a certain degree.
Whichever method you use, it’s a good idea to start going paperless as early as possible. Making Tax Digital comes into effect in 2024, or 2022 for all VAT registered businesses.
3. Organise Your Invoices and Receipts
There is so much paperwork to think about in relation to your business’ expenses. For example, have you collected all of your clients’ invoices, business receipts and any debts for the year? It’s well worth double checking this as you could be losing out. One good way of doing this is to digitalise them all by scanning them so they’re all neatly in one place. Do you keep tabs on your insurance, rent and other overheads needed to keep your business running efficiently? Keeping on track with all business accounting will ensure your cash flow is running smoothly.
Furthermore, once you have organised your paperwork, they then need to be catagorised before entering them onto your spreadsheet. Knowing which transactions are allowable or disallowable expenses, for example, will help enormously when filing a tax return. It will also save you a great deal of time trying to remember the finer details at the end of the tax year, or if you happen to get audited.
4. Use Separate Business and Personal Bank Accounts
If you haven’t done this already, then you should have this up and running as soon as possible. Open up a small business bank account, for example, with Starling, who offer a great service for small business owners. It’s vital you keep your personal expenditure separate from your business finances; mixing them together can result in expenses getting lost or more difficult to keep track of. Remember, you have to enter the figures differently for cash and accrual based amounts.
Ready to Stay on Top of Bookkeeping?
Running a successful business means you have to wear many hats, and knowing bookkeeping basics is just one of them. However, by following this advice, it’s likely you’ll keep on top of your business bookkeeping quickly and efficiently. In addition, it will save you money for your business in the long run. It’s important you don’t delay and find yourself scrambling around for paperwork at the last minute. It’s also worth noting that you should always double check your entries for accuracy, and if you have any further doubts, seek advice from a qualified professional.
- Keeping Tax Records and Bookkeeping When You’re Self-Employed
- Sole Trader Bookkeeping Spreadsheet
- How to Track Income and Expenses
- How to Fill In Your Tax Return Online
Taxes are changing! From April 2024 sole traders will need to report their earnings and pay tax on a quarterly basis. This is known as Making Tax Digital, which you can read more about in this guide to help you get prepared.