Considering it’s so important, it’s surprising how many business owners dread the regular date with their books. Much of the reluctance stems from confusion, either through lack of bookkeeping knowledge or through using a system that’s too complicated for their needs.
If bookkeeping is one giant hassle in your business world, these quick tips may help it become less of a burden.
Decide Between DIY vs Accountant
Entrepreneurs often decide to do it all themselves. But it’s not always a good idea if you don’t know the first thing about bookkeeping or have no head for figures and so let basic tasks pile up. In either case, hiring someone to keep the books up to date for you, or an accountant to prepare the final tax return will take the burden off your shoulders. If you’re going to hire an accountant, have a word up front about how they want your financial information presented. Starting out with a compatible bookkeeping system will save time and money in the end.
We haven’t quite reached the lauded paperless office yet, but we’re getting there. Now HMRC will accept scanned or photographed copies of (most) paper documents, the endless paper trail can be drastically thinned. Your accountant can advise of what paper you need to keep on file and which documents can safely be stored in a solely digital format.
Electronic submission of the tax return is also easier for many than filling in long forms, and if you run an online accounting package much of the information will be automatically collated as you update your records.
Link Your Online Accounting Package to Your Bank Account
Online accounting packages often let you link your bank account to your bookkeeping software, which saves a load of time. All the transactions that pass through your bank are uploaded each day, so all you have to do is log in and check each transaction. Normally the programme will ask you to provide an explanation of each transaction, so everything is categorized from the outset. Categories can be extensive, with subcategories under each major heading. Under expenses, for instance, you may be offered choices that range from transport costs to capital equipment. Correctly categorising everything makes the final breakdown for your tax return faster and more accurate.
Know Your Income Goal
The numbers can get complicated when running a business. Keep it as simple as possible by knowing exactly how much you need to make each month to meet upcoming obligations. Without knowing how much business you need to generate, you’ll end up juggling figures trying to make ends meet. Everything falls into place better when you know exactly what’s going out and can balance it, profitably, against what’s coming in.
When you’re calculating expenses, remember to factor in tax and national insurance. It’s a good idea to set aside the required percentage as you go, rather than hope for the best when it comes time to pay the bill.
The thought of bookkeeping rarely sets the world on fire. But it is strangely satisfying to fill in the columns, add up the totals and see how the business is growing. Even if you see it’s not growing, it’s satisfying to identify the shortfall and figure out what needs doing to turn things around.
Take care of logging expenses on a daily basis. While the business is very small you can maybe get away with weekly bookkeeping, but not for long. Build a system from the start that you understand and can easily update. If necessary, take a course in basic bookkeeping so you know what you need and, maybe even more important, what you don’t. Overcomplicating things will put up barriers and make it even more tempting to put off the dreaded task.
There’s no way to avoid bookkeeping, but it doesn’t need to be a massive chore. And if it is, despite a system that works and an understanding of how things pull together, outsourcing all or part of the process should be a top priority. A clever accountant can find all sorts of ways to save you money, as well as relieving you of the hassle.