Do you struggle to balance your books each month? Not sure what you should be doing? Maybe you have a mountain of invoices and receipts taking over your desk…
…if the above rings true, you may appreciate some practical bookkeeping tips.
At The Financial Management Centre we have put together our top ten bookkeeping tips to help businesses take control of this important task. We know first-hand many small and medium sized businesses find the bookkeeping responsibility a daunting process and what follows aims to provide some guidance.
1. Keep your personal and business finances separate
Maintaining the boundary between your personal and business spending and finances is essential. Mixing the two can get messy and complicated; if you don’t already have separate bank accounts then do so as soon as possible.
2. Keep hold of everything
It's important nothing gets thrown in the bin and that you and your staff get a receipt or invoice for all expenditure including employees’ expenses. Employees should attach copies of their receipts to their expenses claims. You should keep all records for at least 6 years as you never know when you may need to refer back to them and you may have to produce them for the authorities.
3. Filing and invoicing
Keep sales and purchase invoices separately. Sales invoices should be raised and filed in sequential order, whilst there are various ways of filing purchases. Our advice is so long as your system is logical then you should be fine.
4. Keep up to date and top of things
Keeping your books up to date takes time. Establish a routine, perhaps even put some time in the diary every week to update your records regularly. This keeps things organised and lessens the chances of paperwork getting lost. Raise sales invoices as soon as possible and ideally as soon as the goods or services have been despatched or provided. Discrepancies are sure to be noticed much sooner this way and you have got a better chance of remembering things from last week compared to several months ago or even last year!. Reconcile your bank accounts on a monthly basis if not more frequently to ensure all items have been accounted for.
5. Petty cash receipts are important
Don’t be nonchalant about keeping accurate records of your petty cash fund. Each time you dip into petty cash, you must make some sort of record in order to keep track of the amount being spent. You should reconcile your petty cash account regularly. You can then spot any inconsistencies and know where your money has been going and reduce the risk of theft.
6. Cash and cheque payments
If you receive cash and cheques from your clients and customers make regular possibly even daily bankings. Again this reduces the chances of payments getting lost or stolen and the sooner the funds are in the bank the better.
7. Credit control
Keep an eye on your debtors and manage them effectively. Slow and late paying customers can harm your business by taking advantage of your “loan”
8. Forward planning
There is nothing worse than getting a fine from HM Revenue & Customs. Bear in mind potential future expenditure such as VAT and other tax payments. We advise business owners to try and set aside funds perhaps in a separate bank account, so that when it comes to pay those bills there is money available and no need to panic.
9. Learn the basics
It's a great idea to have an expert handle your bookkeeping but even a little knowledge can make a difference to you. Perhaps an emergency lands you responsible for a day or you may want to speak to your bookkeeper or accountant regarding something in your accounts, either way it pays to have a basic understanding.
10. Hire a professional bookkeeper
Remember there are experts in the field of managing accounts who have the skills and experience to ensure this important part of your business is maintained correctly. By outsourcing your bookkeeping you will free up your time to focus on running your business and you could benefit even further by asking for regular management accounts information to help you do that more effectively and with accurate information to hand. At the very least using the services of a professional bookkeeper should help reduce the cost of getting your year-end accounts produced.