As a small business owner and an entrepreneur, you have to juggle many balls on a day-to-day basis to keep your business running and growing. Bookkeeping and Accounting are probably the last things on your to-do list, if they are on it at all! This is a big mistake, having a sound knowledge and understanding of your Accounts will enable you to see how your business is performing and keeping them up-to-date is an integral part of ensuring you know which parts of your business are excelling and which parts may need a review.
The following should give you some pointers to help you keep your Accounts in order and to ensure the job of doing them does not become too daunting, so read on and take the first steps into getting your Accounts in order.
1. Make it a Priority from Day One
It’s normal to put off doing tasks that you are not interested in but, as everyone knows, this just makes them more daunting and even less appealing to do further down the road. Don’t put off doing your bookkeeping, keep your Accounts up-to-date from the very start and ensure they are updated on a regular basis.
2. Decide on the Correct Accounting Package
Your businesses Accounts do not have to be kept using expensive Accounting software. If you decide to use an Accounting software package there are plenty of cloud Accounting solutions with varying monthly fees, and even some free packages. You can even keep your businesses Accounts on a piece of paper or a spreadsheet such as Excel. If you already have Excel, then keeping small business Accounts here is a great option that can be done for no extra cost. As your business grows it is often a good idea invest in a good cloud Accounting package as these come with a host of extras such as invoicing and the ability to keep track of paid and outstanding invoices, etc.
3. Do it Yourself or Hire a Professional
There’s nothing stopping you from doing all the bookkeeping yourself and filing your Accounts and, as long as you take head of point one above, it would obviously save you money rather than paying for someone to do it for you especially if you are just starting out and cash flow is a bit tight. However, employing a third party to keep your Accounts up-to-date doesn’t have to be expensive. You can agree hourly rates or fixed fee’s for a bookkeeper to update your Accounts on a weekly, monthly or quarterly basis. If there are only a few transactions going through your business to start with then the fees would be quite small and would only grow as your business grew and there was more work required to keep your Accounts up-to-date. Employing a professional to keep your Accounts in order also gives you peace of mind that everything is being recorded and filed correctly.
4. Separate your Business and Personal Expenses
It can be easy to blur the lines between Business and Personal expenses and income but you should keep these finances and Accounts separate. Setting up a business bank account which is used exclusively for business matters will enable you to distinguish between the two and will ensure your Accounts do not get confused.
5. Learn how to use the Three Main Management Accounts Reports
Knowing how your business is performing is integral to running a successful business. If you keep your Accounts up-to-date there are three main reports that can be extracted and used to keep track of how things are going throughout the year. These are:-
- The Balance Sheet – will show the net worth of a business.
- The Profit and Loss Account – will show the businesses net profit or loss within a given period.
- The Cash Flow Statement – tracks the cash in and out of a business and is used to predict future cash transactions and balances.
6. Create a Payroll System
As your business grows and you take on permanent and/or contract staff to will need to keep track of your payroll. Most cloud Accounting packages have an option that allows you to run Payroll so this can help keep things simple. Alternatively, this is another thing you can outsource to a third party so that you don’t have to worry about making HMRC submissions on time and calculating pay, ni, tax, etc.
7. Plan for and Expect Major Expenses
Large purchases and major expenses, such as computer upgrades, tax payments, etc, shouldn’t come as a surprise. Make sure you plan ahead and budget for expenses in the future.
8. Shorten your Payment Terms
Sometimes your cash flow can get tight if you are waiting for payments to come in. Shorten your payment terms and you can ensure payments are received quicker and there is less time between supply and payment.
9. Chase Outstanding Invoices and Receivables
Just because you’ve invoiced for goods or services provided don’t assume payment will always automatically follow. Keep an eye on your receivables and chase any outstanding debt to ensure your customers payments are up-to-date. If you do have outstanding payments, make sure you have a procedure in place to chase your customers to receive payment.
10. Review and Re-Evaluate Your Methods and Procedures
As mentioned above, if your business is small you can no doubt keep your business Accounts in an Excel spreadsheet but if you find this is becoming too cumbersome, you’d probably be better moving to a cloud Accounting system. You may decide to try to do the bookkeeping yourself but over time this may take a backseat to other business tasks so you might decide to outsource your bookkeeping. Processes for Invoicing, Payroll, Credit Control, Management Accounts should all be regularly reviewed to make sure they are being handled in the best way possible and are not being neglected.
If you follow some rules and guidelines you’ll keep your Accounts in order and your business running smoothly. If you don’t have time to keep the books yourself, feel free to ask for help. That way you will have more time and some invaluable assistance to take your business on to bigger and better things.