Bookkeeping isn’t everyone’s cup of tea, but it is a vital component of running a small business. Starting out, when budgets are tight, the bookkeeper will probably be you. That’s why we thought it a good idea to run through some of the basics for you.
Is there a difference between bookkeeping and accounting?
Yes, there most certainly is a difference.
Bookkeeping involves the recording and reporting of daily financial information. In contrast, accounting is the process of using that information to work out your business’s financial position to create a financial strategy.
So, as we’ve already mentioned, bookkeeping is the day-to-day management of your business finances, which includes:
- Paying bills
- Creating invoices
- Chasing payments
- Making sure your business pays the right amount of tax
- Claiming expenses
- Managing payroll
To do all those things, you’ll need at least these three financial records: cashbook, sales invoice, and purchase invoice.
7 bookkeeping tips for small business
Now that you know what you need, here are seven tips to help get you started.
1. Records, records, records
Make sure you keep records of every payment made and received. It’s essential to show where they were made or received so you can easily find them in the future should you need to.
2. Meet your deadlines
Late payments (especially to HMRC) are a no-no. Make sure you not only hit your deadlines (to avoid fines) but that your clients are also given clear deadlines for making payments to you. That way, you can keep track of your incomings and outgoings and identify late payers, so you can decide whether to keep working with them or not.
3. What are you spending?
You can claim back business expenses, but you must keep all receipts to substantiate your claims from HMRC.
4. Keep your filing up to date
All your bank statements and invoices must be filed in order and correctly. That way, everything you need will be at your fingertips and, should you hire a bookkeeper, they won’t have to spend hours trying to find things.
There’s no need to splash out on fancy software when you first start out. Excel works perfectly. However, as your business expands, you may need a specialist package (or hire a bookkeeping service that already has it).
It might sound like a hassle, but creating monthly reports will help you stay one step ahead. You will be able to keep a check on your financial position so that you won’t get any nasty shocks along the way.
7. Outsource your bookkeeping
We all have different strengths and weaknesses, so if this sounds like a headache waiting to happen, why not investigate the costs of hiring a professional bookkeeping service? It may well work out cheaper (and more accurate) in the long run and free up your time to get on with running your business.
Bookkeeping is an essential element of running a business. It’s up to you how you do it, but it’s important to remember all the points we’ve raised. Using a professional bookkeeping service could save you money (and a lot of stress) in the long run.