Although other elements of your business may seem more pressing, it's essential to set aside enough time each week to ensure that your books are in order - keep putting it off and you'll quickly find that your accounts become unmanageable.
Here are five key ways to take charge of your bookkeeping.
- With the help of your accountant, create a calendar or spreadsheet of important tax-related dates. Place it where it's easily visible. If you have a permanent reminder of key dates you'll know what needs to be done by when.
- Implement a system that ensures you can maintain three sets of records.
- cash book - keep a record of all the transactions into and out of your business account.
- purchase invoices - keep a chronological record of how and when you pay your invoices.
- sales invoices - again, maintain a chronological record of when and who you have invoiced, and when you get paid.
Ask your accountant if he or she can recommend appropriate accounting software for your business. A good program will help you keep on top of all your income and outgoings. However it's essential that you receive the proper training. A badly used accounting program is much less effective than paper records and files. Either way, a good system will make your accountant's life much easier and keep your costs down. And remember if you do go down the accounting software route, make regular backups of your data.
- Keep your personal and business accounts entirely separate. Although you may own your business outright, if you start to use your business account to pay for private items of expenditure your accounts will be much harder to reconcile. In the event of a tax enquiry by HM Revenue & Customs (HMRC) your private bank account will be treated as a business account if you are using it regularly to make payments or bank any sales receipts there.
- Depending on the type and complexity of your business, try to be consistent about when you do your books. It's tempting to do them at the end of the day or week. However this is when you're likely to be most tired and potentially make mistakes. Try to do your books in the morning. The more frequently you do your accounts the easier they are to maintain.
- Get help and advice whenever you feel things are going astray. It's counterproductive to let your accounts get on top of you as you're more likely to make mistakes. If necessary employ a part-time bookkeeper to help you stay on track. The bookkeeper will likely prove cost effective in the longer term.
Keeping up-to-date accurate records and regularly reconciling your accounts is your responsibility. As well as making your life easier when it comes to your year end, good record keeping will also provide important financial information that will help you run your business more efficiently.
Cloud Accounting can show you how to automate bookkeeping to significantly reduce time and avoid costly errors.