Bookkeeping Advice: How To Stay On Top As A Small Business
When you are a small business, one of your top priorities is sorting out your taxes. After all, once the tax year has finished, you will need to complete your tax return for HMRC. But keeping on top of your bookkeeping can be tricky when you are a busy business owner.
30th May 2022
When you are a small business, one of your top priorities is sorting out your taxes. After all, once the tax year has finished, you will need to complete your tax return for HMRC. But keeping on top of your bookkeeping can be tricky when you are a busy business owner. However, it’s so important you stay on top of bookkeeping, so it is accurate and the process is straightforward when the time comes. Here is our advice on how to stay on top of bookkeeping as a small business.
What exactly is bookkeeping?
Bookkeeping essentially means keeping note of all your transactions and expenses in your business. Collecting all your receipts and organising them is essential for when Self Assessment occurs at the end of each tax year. Keeping on top of any unpaid invoices as well as storing invoices is also an important part of bookkeeping. Whether you are going to do your tax yourself or hire an accountant for the bookkeeping of your business, you need to keep on top of your bookkeeping to make the process more efficient.
Tips on staying on top of bookkeeping
Track your expenses
Expenses are one of the most important parts of bookkeeping. After all, they can help lower your overall tax bill. If you don’t keep track of them, you will not be able to claim them when it comes to filling out your tax return. The best way to keep track of expenses is to separate them into different activities. For instance, if you have a team who might need to have travel and accommodation expenses etc covered, this could be one category. Another category could be items you require for your business. For instance, tablets, laptops, stationery etc. You could also have a category for bills that you pay to run your business from your home or office. You can record the electricity, gas and internet in this category. Setting up these different categories will help you to calculate these expenses much easier when the time comes for your tax return.
Once you have categories, ensure you keep any supporting documents in these so you have the proof that you have spent that amount on that item. You need to keep receipts or bank statements to prove that accurate amount. If you have bought anything online, ensure you keep a copy of the email in your documents in case HMRC do get in touch with any queries about expenses.
Remember to clarify exactly what you can claim before you get starting tracking expenses.
Do get a separate account for your business finances
It can get very confusing if you have your personal finances and business finances in one account. You will have to look through other payments going in and out when trying to track the payments made to and from your business. This will be hard to clarify and you might accidentally miss payments or even record payments that are not to do with the company. Therefore, you need to set up a bank account which is specific to the company. Talk to your bank and set up the account, ensuring only business transactions are made in this account. Remember if you are a limited company, this is a necessity.
Keep on top of invoices
It’s so important for the sake of bookkeeping that you keep on top of invoices. You want to ensure you have the accurate amount you have in credit before completing your tax return. If customers still owe you, it will be hard to keep track of the payments. Therefore, make sure you send invoices to clients in good time giving them a clear date on which you expect the payment to be made. That way, there can not be any confusion over payments. If they are late, make sure you chase the payment. You do not want to get into debt and have inaccurate records. Additionally, if you haven’t filed them correctly, this could get confusing. Place them in date order and if you have several clients, it’s worth separating them for each client. That way, it will be much easier to calculate the payments when it comes to completing your tax return.
We all know how easy it is for a computer to break or to misplace a document in your home. Therefore, when it comes to bookkeeping, the best advice is to make sure you back-up everything. Make copies of invoices and receipts and always save them on your computer in several places and on software online. That way, if you do misplace an item or it gets lost in an accident, you will have copies available. Therefore, you can still have accurate records if the worst-case scenario does happen.
Use bookkeeping software
There is different software available to help you with bookkeeping. They can take some of the stress away as they can provide an easy way to record invoices and they are argued to improve accuracy when filing your tax return. They can also be an efficient way to calculate profit and provide future forecasts. These types of software do come at a cost so it’s worth taking this into account before starting up with one. Before choosing the right software for you, make sure you read up about the best ones out there and get recommendations. That way, you know you are getting the best option for your business accounts.
Take a bookkeeping course
There are bookkeeping courses out there if you do require some additional assistance. These can help you to ensure you conduct your bookkeeping effectively and will help you learn the process. You can find these online or in your local area. YouTube also has some free videos you can watch for some extra help.
Remember to budget for your next tax bill. You always need to ensure you have put enough money aside for the bill. That way, you will not run into money trouble with a large bill on your hands.
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