Whether you hire someone to do it for you, or you look after your own bookkeeping, you MUST have a good system in place to stay on top of your business’s finances. By understanding where your money come from and goes to will help you make better decisions in every aspect of your business.
Here are some basic but relevant and useful bookkeeping tips from our years of experience.
First of all - why good bookkeeping is important
- Understand how your business is performing.
- Make informed spending decisions.
- Ensures you have enough to pay invoices when they’re due.
- Keeps track of your tax and what you owe.
- If you need a loan or are looking for investors, they’ll want to see comprehensive, accurate and current books.
- To budget and plan for key milestones or financial events.
Four essentials for good bookkeeping
Aptly named, this is the money coming and going from your business and how much of it is actually “real” (as opposed to forecast or awaiting payment on an invoice) and yours to use. You know you have good cash flow if you have enough money available to pay what you owe when it’s due.
Profit and loss or Income statement
This annual accounting report shows what’s come in and what’s been spent across the year. If more came in than went out then you made a profit.
A balance sheet provides a snapshot of your business’s financial position by showing what you own and owe at the time of the report.
This is an estimate of money coming in and going out over a set period, your income and spending, if you will. You need to have a budget because you always need to be thinking and planning ahead in business; that goes for your spending too.
Best bookkeeping tips
- Make doing the books a priority.
- Do them often and be thorough.
- Automate payments and invoices. Not only does it save time in the long run, locking them in as non-negotiables means you’ll find budgeting much easier and more accurate.
- Invest in the right software. (We can help advise you on what’s right for your business)
- Use a payroll system.
- Reconcile often. Because you’re busy running a business you might be surprised how easy it is for a payment to be missed (either going out or coming in).
- Have a separate bank account for business to keep a clear record of money coming in and going out.
- Do a physical inventory at least once a year. Not only will this check you’ve suffered no losses of property, you’ll also be able to see if anything needs replacing in the coming financial year.
- Savings accounts aren’t just for private individuals. Putting aside a percentage of your earnings helps cover taxes, levies, bills and other expenditure.
- Set a budget and compare it back to your books once the month is over.
Common mistakes to avoid
- Trying to do it all yourself. Bookkeeping is an area that cannot be done carelessly or partially. If you struggle to do it yourself you should definitely seek help.
- Not having access to records that can help you understand your finances.
- Spending the money that’s needed for bills.
- Not having savings put aside for bills you know are coming.
- Not having savings put aside for unexpected expenses!
- Invoicing late.
- Not chasing up debtors promptly.
- Not asking for help or advice when you need it.
Get in touch with us for more advice.