When running your own business, it is important that you keep accurate financial records.
Accounting doesn’t have to be time-consuming, and staying current can save you money, make your business more efficient, and help it grow.
Here’s how to make managing your books easier.
Get the right accounting system for your business
It is important for any new business to set up a system as quickly as possible. You need to be able to keep records of expenses, income and taxes from the start.
Make sure the system you choose is easy to use and fits your daily activities. There are a number of options, from keeping paper records to using accounting software. Online systems can be easier to use because they automate calculations, enable report creation, and give you access to the data you need.
Fortunately, with the right software for your small business, you need to be able to easily keep records of expenses, income, and taxes right from the start.
John Leonard, general practice partner at BNL Chartered Accountants and a member of the Sage Accountants’ Network, says most of his clients have moved to electronic records.
“That’s good news because it definitely makes things easier. Cloud software is also a good option. It makes a big difference because we can access customers’ records to help them or identify problems early.”
Do you have a schedule
It’s worth setting aside time to manage your books on a regular basis – this could be first thing in the morning or at the end of the day.
It’s important to stay on top of things – little and often is a good approach and makes it easier to stay informed.
John says it can create challenges for his clients when things pile up. “We often receive information late, sometimes at the end of the year. Current accounts can be very useful for year-end tax planning, as they allow us to look at opportunities for the business. If you wait too late, you could miss something.”
It is also important that you do not miss important deadlines such as VAT, corporation tax and social security payments. Making these payments late can result in penalties that add up quickly. Keeping your accounts current will help you see what you owe and keep track of your obligations.
Get the right advice
Accounting has its own rules that you may not be familiar with. Therefore, it is important to ask for support.
“Get advice on the things you don’t understand as quickly as possible,” says John. “Your accountant can help with this – that’s what we’re here for. Don’t wait until the end of the financial year as it can be difficult to correct historical information.”
Reconcile your bank statements
Reconciling the information in your accounts with the transactions in your bank account is an essential part of accounting. It ensures that all income and expenses are accounted for and acts as a check to ensure everything is balanced.
Software can help make this easier by automating the process. For example, accounting software allows you to import your bank statements and the software automatically matches the transactions with the information in your accounts. You can see exactly what has been added and make changes if necessary.
Keep an eye on your bills
Late payments can cost a business, impact cash flow, and make follow-up time-consuming.
Therefore, it is important that you follow up as soon as possible, issue a second invoice and call to find out if there are any problems.
If you wish, you can charge additional fees for late payments. The government states that these late fees may apply if payment is not received within 30 days (or within the period specified in a contract if longer). You can also get Advice on the amount of fees and collection costs that may be charged.
Take advantage of every training session
For John Leonard, training is one of the most important elements of managing your accounts.
He says: “It’s definitely worth investing in training as it will help you get the most out of your software and the information in your accounting records. There’s an assumption that software can do everything, but while it’s definitely helpful, you also need a working knowledge of how accounting works.”
“We recommend that you seek training from your software provider or from an accountant or accountant who has the necessary skills.”
Use the data in your accounts to understand your business
If you’re spending time on your accounts but not using the data to gain insights into your business, you could be missing out.
John says: “A misconception is that creating accounts is just for Revenue and Companies House. However, they should be a tool to help you monitor the company’s performance.”
“People often focus on the time it takes to prepare their accounting rather than the usefulness of the insights. The real benefit is that your accounting can tell you whether you’re making a profit and where the company is overspending. When used correctly, they can really tell you where your business is headed.”