Bookkeeping 101 - Part 2
Keeping Organised and In Control
Following on from my blog 'Bookkeeping 101' I want to extend the tips to help business owners better manage their finances:
Set aside a regular day to process your bookkeeping - just like brushing your teeth, it boring but a necessity.
Use a spreadsheet or accounting software to keep all your income and expenditure in one place.
Go paperless - better for the environment and better for your wallet.
Have a separate bank account and use it ONLY for business - it will make it so much easier to keep track of your finances and take you less time.
Have access to all your HMRC business taxes, for example Self Assessment tax, Corporation tax, PAYE, VAT.
If you are a lower rate tax payer (20%) put aside 30% of your profit each month for tax, either in a separate bank account or pay it directly to HMRC.
Once a tax return has been submitted, do not go back and change the figures within the bookkeeping system.
Don't forget about cash income and expenditure.
Understand the type of business entity you are, for example, charity, sole trader, partnership, limited company, as the rules for what expenses you can claim differ.
Understand the difference between accrual and cash accounting: Cash accounting is based on the dates payments were made and received, this is usually used for sole traders. Accrual accounting is based on invoice dates.
Automate processes where you can.
Keep a buffer in your bank.
Make notes of tax payment and submission deadlines
Don't overlook reconciling - this is simply ensuring the balance on your bank account matches that on your spreadsheet or software.
Do not assume your super duper, automated accounting software does it all for you and with no errors. Despite what the adverts tell you, this is simply not true, otherwise we would all be out of a job!!
I hope these are useful tips and aid you in keeping organised and on top of your bookkeeping. However, if you are feeling overwhelmed please give me a call and ask about what packages I can offer you.