Bookkeeping tips for small business owners
Posted on 15th April 2021
Bookkeeping is a record of all your business’ financial transactions logged in a way that’s easy to see what money is coming in and what is going out.
We believe that bookkeeping should be updated on a regular basis, otherwise you could find yourself struggling to pay your taxes in an efficient manner. This could even result in a penalty fine for submitting late or incorrect tax filings. EEK!
Here are our top tips for managing your bookkeeping. But if it isn’t your thing – get in touch to discuss our bookkeeping services! It will leave you free to work on your business, serve more customers or simply enjoy a well-earned rest. Leave it to the professionals, as they say!
We advise that you habitually balance your books. Our tips for staying on top of your bookkeeping are:
- Set aside a time slot each day or week for this task
- Use this time to enter income or expenses into your bookkeeping system
- Choose a system that works for you
- This can be accounting software or a simple excel spreadsheet
- File your invoices and receipts in a way that you can locate them if needed
Separate business bank account
HMRC may ask you to provide evidence that your purchases are ‘wholly and exclusively’ for business purposes. By ensuring you have a separate bank account for your business, you will not need to go through your personal banking records to identify your work-related expenses and can easily provide the bank statements if needed in an investigation.
Don't use cash
Using a debit or credit card instead of cash, will ensure all your transactions are recorded electronically.
Although you are required to keep receipts as proof of all business purchases, if you do lose a receipt or two, at least you will have evidence on your bank statement of the cost incurred.
And, if you pay by card, you can’t miss those pesky cash expenses that you forget to total up!
Don’t forget to keep track of any business miles you travel in your own car. You can claim 45p per business mile for the first 10,000 miles, and 25p thereafter. This can really add up! Start keeping a log of the journeys to have evidence for HMRC (if needed).
Digital bookkeeping software
Investing in digital software that works on your phone or tablet could help you save time and money in the long run. Being able to raise invoices and record your expenses and mileage on the go means you’re less likely to forget to record them.
As Xero Gold Partners – we highly recommend Xero and would be happy to show you around. We offer all Effective Accounting clients a discount on the RRP too (nice little perk!)
If you don’t feel you can justify this cost, then try using a cloud-based spreadsheet that you can access from anywhere to record your outgoings.
Make sure you always keep your receipts and mileage records, in case the HMRC want to investigate your business. Being able to provide straight forward records for them will certainly help you stay out of troubled waters.
Printed receipts can often get lost or even fade with time, making them unreadable. We recommend that you scan them in and store them electronically. As HMRC now accept digital copies, the easiest way to do this is photograph them with your phone and save them to a hard drive. Make sure you clearly label them with the date of the expense and what it was for.
We use Dext for this – and we provide this FREE to all our clients. Get in touch if you want more information!
When it comes to filing your VAT returns, Corporation Tax return or Self-Assessment return, we advise you never to leave it to the last minute. It’s easy to delay your admin as something that is an inconvenience that gets in the way of the ‘real’ work. But if you stay on top of it, rather than letting it get out of hand, in the long run this will save you time and reduce your stress level.
You are much more likely to run a successful and rewarding business if your accounting and bookkeeping is up to date and done in an orderly fashion. This admin is an inevitable and essential part of running your own business or being self-employed.
With clear bookkeeping comes the ability to predict what taxes you will need to pay, allowing you to save up the correct amount and then pay your bill on time without incurring any penalties.
We recommend you put a percentage of every paid invoice into a savings account, that way you’ll be prepared when your bill is due!
Let us help you
If this all sounds like a bit too much and you’d rather leave it to the professionals, then please get in touch. We offer a bookkeeping service, so you don’t have to worry about the detail.
By putting an expert in charge of your accounting, you can focus on delivering your excellent services or products to your customer and growing your business, without the distraction of all that number-crunching.
Nicola J Sorrell -
Founder | Xero Champion | IR35 Expert
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