Setting up a business can be exciting, but getting it off can sometimes be challenging. The early-stage mortality rate among startups is high. There are several reasons for such a higher rate; however, poor financial management is usually at the top.
💡 Learn the mistakes to avoid. Read 20 mistakes SMEs make that can lead to business failure.
Accurate bookkeeping is building block of sound financial management. So what is bookkeeping? Bookkeeping is the art of recording a financial transaction. If you record the information incorrectly, then subsequent financial reporting will be inaccurate-GIGO (Garbage-in garbage-out).
Your business is on the path to success if you are maintaining up-to-date and reliable accounting records. You need to hire experienced & skilled bookkeepers & accountants in London to make your business better every day.
Here are the 7 bookkeeping tips every small business owner must know to handle small business accounting effectively.
1. Keep your Personal and Business Finances Separate
Using the same bank account for business and personal purposes is a common mistake many small business owners usually make. However, this can seem like a practical thing to do at first.
Later on, attempting to distinguish between personal and business is a struggle you don’t want to go through. When you decide to start a new business, always set up a separate bank account for that business. There are many banks, like DBS, UOB and the list goes on.
A business bank account can help you in many ways:
- Helpful in sticking to your business budget
- Organise records for accounting
- Keep the business finances separate from personal
2. Keep Systematic Records From the Beginning
Organising and managing accounting records such as business invoices, supplier bills, and employee payroll can make or break your business’s books.
💰 If you are a SME, outsourcing your company payroll to a professional firm can actually save you more time and money. Don’t believe us? Find out why here.
The financial position of your business can suffer if you fail to keep accurate records. Consider maintaining a paperless edition to ensure you preserve your accounting records. That way, in case accounting information, is misplaced, destroyed, or lost, you have a backup.
3. Use a Cloud-based Accounting Software
You can use accounting software like Xero, Quickbooks and MYOB to do the bookkeeping. The benefits of using cloud-based software are cost savings, security, flexibility, mobility, loss prevention, automatic software updates, quality control, audit trail, inventory management and many more.
❓ Xero vs. QuickBooks vs. MYOB, which cloud based accounting software is better? Find out here.
Most of these have an invoicing module, which means you can track any unpaid invoices.
4. Automate
Use automation, wherever possible, to save time. As a startup owner, time and cash are scarce resources. Utilise all automation tools of software, like rules, direct bank feed to save time.
🤵 Find out the most common traits of successful entrepreneurs here.
If you are a business with a higher number of transactions, consider using data extraction tools. For example, Dext, Hubdoc or AutoEntry. These tools use Optical Character Recognition (OCR) technology to extract data from your supplier bills accurately.
5. Record your Income Accurately
Accurate recording of customer invoices is equally important as much as the recording of the supplier bills. Without this, business profits will be inaccurate.
Always sequentially number your invoices and credit notes. If you have a limited number of customers, try invoicing on a fixed date – say 1st and 15th of every month. In accounting software, like Xero, you can setup recurring invoices, saving you time. Learn how to use Xero in 12 simple steps.
6. Set a Time
It is easy to lose track of time as a busy business owner and miss any deadlines. Another month or year has gone by as soon as you know it.
I suggest that you set a time in your diary to do the bookkeeping, say fortnightly or monthly depending upon the number of transactions and how hands-on you want to be.
Try setting reminders to stop missing deadlines and keep your books of accounts prepared as tax season comes. To ensure that you don’t miss any upcoming due dates, add business tax return due dates and other necessary reminders to your calendar.
⚠️ Missing deadlines can result in penalties. Read the penalties for late annual returns filing and late submission of GST returns.
Use a digital calendar like outlook to track important dates and set up reminders for yourself. That way, your books will be up to date, you can settle your tax liabilities on time and stay away from penalties.
7. Know When to Get Help
Accounting and bookkeeping services are not as costly as many of us think they are. Hire an accountant and let professional bookkeepers do the bookkeeping for you. Hiring a professional accountant or bookkeeper will make a huge difference, even for just a week or month.
To begin with, you can prevent expensive mistakes and handle your money more effectively. Eventually, skilled bookkeepers will help you in many aspects, including your daily bookkeeping, GST returns, tax filing and other business recordkeeping.
Winding-up
The above mentioned 7 tips for bookkeeping are essential, and every small business owner must know these.
If you are not sure that you can do your small business accounting, you can hire Timcole.
Timcole offers customised bookkeeping packages that are catered to your business needs.
