Top tips to help you set up and improve your bookkeeping function

Bookkeeping is an essential part of your business to help you keep track of your business objectives in order to stay in line with your long term business goals. It is very important to keep track of your cash flow, finances, taxes and the health of your business. Efficient bookkeeping helps in doing that by keeping track of the important aspects of your business. Learn how you can keep your financial books up to date to help you engage in informed decision making to help your business grow. Learn more about how poor bookkeeping can impact your businesses performance.

1. Open a separate business account.

The first step to effective bookkeeping is to separate your business expenses from your personal expenses. So, it’s important for entrepreneurs to open a business bank account as soon as they begin their business operations. Mixing your personal finances with your business finances will only lead to inaccurate bookkeeping and will waste a lot of time for the bookkeeper, or you (if you are bookkeeping yourself). Ensure that you get set up a bank account which also provides you with online banking access.

2. Understand what an effective bookkeeping system is.

You need to introduce ways and methods through which you can improve your business’s bookkeeping processes, in order to do that you need to understand what an efficient bookkeeping system is. An effective bookkeeping system is one that allows you to track important financial information effortlessly, protects sensitive company information and is updated on a regular basis.

3. Compile your business documents

Keeping your business documents organized over time is a must for every business owner. By keeping your financial documents organized, you are easily able to track any query that may arise in the future and will also serve as evidence if the tax man approaches you for working out your taxes. According to tax departments, businesses are required to keep their tax-related documents and claims for at least 6 years.

4. Track your cash payments

Any cash that flows in as a payment should first visit your business bank account before it is spent. One may instantly payout their suppliers or vendors after getting cash in hand, but without getting paid into the bank account first it might lead to confusion and errors whilst tracking the transactions. Moreover, there is a high risk that you or your bookkeeper might forget which customer has made the payment and which has not plus you need to enter in any expenses that are incurred into your account to enjoy potential tax reliefs.

5. Keep your bookkeeping system up to date

Businesses can sometimes run out of cash and accumulate huge debts, however, they can prevent this by ensuring quality monthly reporting and bookkeeping. By keeping your system updated, the data becomes more reliable and accurate which then helps in informed decision making, helping prevent such situations. Every entrepreneur should at least try to get their books up to date every quarter, you can do this by hiring a competent accountant or an effective bookkeeper.

6. Keep your invoicing game up

An Invoice is a document that confirms the payment that is due from customers in exchange for goods and services that you have provided. You need to ensure that you send out invoices to your customers as soon as a service is provided to ensure that cash is flowing in your business. This will prevent any potential cash shortages in the future. Ask your accountant to confirm if bookkeeping system they are setting up for you includes an invoicing system.

7. Your employees should get paid on time

Your employees are the life and blood of your business, so it’s your duty to pay them on time to keep them motivated. Always keep aside some extra cash to be able to cover payroll taxes. To avoid any fines and penalties, make a habit to file your payroll on time and send out any payment that is due within the set time frame.

A payroll accountant on board can help you meet your business’s payroll obligations quickly and safely.

8. Track your current finances regularly

It is important to stay updated on your company’s financial standing and position in the market. You are advised to keep track of the finances flowing in and out of your business personally by making notes. Think about what you have earned and what you have lost and note it on a piece of paper. You should cross-check this with your bank balance and address any discrepancies that arise. Effective and regular bookkeeping will make this process easier.

9. Use a suitable bookkeeping software

For small businesses, simple software that can perform the functions related to the cash book, general ledger, accounts receivable and payable, and tracking business bank accounts would suffice. However, you might need to purchase slightly more complex software as your business grows over time.

Quickbooks, Freeagent and Xero are some of the leading bookkeeping software that you can utilize. 

10. Organize and record your information digitally

Running a business means that you will have to deal with large amounts of paperwork, it is, therefore, important to differentiate between what is important and what is not. Typically, you will be required to keep track of your invoices, bills, receipts, tax documents and bank statements manually. But here is what we advise you to do, start organizing your financial documents from today and store them online (if you haven’t already). Utilize an online backing up software to transfer all of your bookkeeping records to the cloud to ensure your documents are safe and available whenever you need them.

11. Introduce automation

The benefit of living in the digital age is that processes can be made more efficient by using automation. You should, therefore, automate your bookkeeping practices by encouraging the use of cloud-based bookkeeping software. 

Clear House Accountants are experts Accountants in London who work with a large number of businesses helping them build a strong foundation through effective bookkeeping measures, which in return enable their businesses to grow and develop faster.

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