5 Top Tips for Bookkeeping
If you are doing your own bookkeeping, it can feel overwhelming at times. However, I have broken the process down and identified 5 key areas that I recommend you focus on.
By doing these 5 things regularly, your bookkeeping will become a smooth and simple process…and will become a very valuable asset for your business growth.
WHY BOOKKEEPING IS IMPORTANT
Before I dive in to my 5 top tips for bookkeeping, I just wanted to remind you why bookkeeping is important and why it is worth allocating time to having good processes in place that help you to do it with ease. And why to do it regularly.
When you have a good system and good tools in place – you can:
🍰 save time spent on admin, which means you can work on your business or have fun with family and friends instead
🍰 make informed business decisions, rather than guess and later regret missed opportunities
🍰 enjoy the journey to success by really tracking what is happening and seeing growth. Record how you are getting closer to your chosen business goals. After all, we all are in business to change our lives for the better.
So how can you can closer to making your bookkeeping a key part of helping you reach your business (and life) goals?
Record your purchases - have a process that makes it easy and minimises mistakes
Bookkeeping is a type of admin. These first two tips may seem really obvious…of course, you need to record sales and purchases. However, it’s not just about doing it. It’s about what you record and the process of recording. This is where getting behind with your bookkeeping can easily happen and have detrimental effects.
Decide on a process which feels logical to you and can be done with ease.
My first tip is to make sure you know exactly what you need to keep. This includes:
- bank statements
- receipts
- petty cash books
- orders
- purchase invoices
Importantly, although you do not have to send these to HMRC, they can ask for this evidence up to 6 years after the end of your business financial year, so ensure they are kept securely and safely.
You need to decide how you are going to file and keep these items, and where. You can keep items in paper form, digitally (on your own computer) or as part of your accounting software (often cloud–based). You can also include photographs of paper originals so that you have digital copies.
There are penalties if records are not accurate, complete or readable.
If you are VAT registered, you also have to comply with Making Tax Digital (MTD) rules. If you are unsure about what you need or how to record purchases, get in touch for more information.
Importantly, ensure you are clear on the process of recording purchases, as they are made, and that also any staff or support you employ do too.
Record your sales - have a process that makes it easy and minimises mistakes
As above, you also need to have a clear process in place for recording sales – this should be the fun bit! Record all that money coming in!
Similarly to purchases, whilst HMRC does not expect you to submit these, you are to keep:
- all bank statements
- bank slips
- till rolls
- till reports
- receipts you issue (for cash sales)
- all sales invoices
HMRC can ask for evidence of any sales for up to 6 years after the end of the business financial year.
Like with purchases, you can store items in paper form, digitally (on your own computer) or as part of your accounting software (often cloud-based).
There are penalties if records are not accurate, complete or readable
Again, if you are VAT registered, you also have to comply with MTD rules. If you are unsure about what you need or how to record sales, get in touch for more information.
Creating and sending invoices, recording sales and issuing receipts can be made very simple with good online accounting software and a good till system (if relevant). However, whatever you choose, work out the process and have a system that makes sense to you (and your staff, if applicable).
For both purchases and sales, this systematic record-keeping also makes reconciliation and evaluation easier and more accurate. See my next tips…
Regularly do your reconciliations - set aside time each week
The word reconciliation may sound scary..but it’s not. It’s just about cross-checking everything. It’s checking if you have all the bills and receipts needed and double checking that all invoices were paid, for example, and that everything ‘agrees’.
If it seems scary to you then face that fear and do it even more regularly. The longer you leave it each time, the bigger and more time-consuming the job becomes. When you set aside time each week, it becomes a small, quick-win task.
To do your reconciliations, go through your bank statement line by line. Make sure every transaction is recorded correctly. How exactly you do this will depend on how you keep your records and what software you use. Using an accountancy software, like Xero, makes it very simple, enabling you to cross-check money in and money out, alongside the records you should have of the purchases and sales.
It is also why using a separate bank account for your business saves so much time. Instead of looking through a personal bank account and trying to pick out business transactions, all you need to do is just match the bill or receipt to a transaction on the bank statement.
Please note, that if you are running your business as a limited company you must have a separate bank account.
Evaluate your purchases - allocate time to regularly assess what is a 'must purchase'
Whilst record keeping and reconciliations are essential tasks, the real advantage of regular bookkeeping is the business insights it can offer you.
Purchases are always a difficult one, especially in this economic climate. We are often looking for ways to save money and we often think this means spending less.
It is also vitally important that we record all purchases accurately, as long term, this can actually save on tax. When doing your tax returns, you know exactly what you can claim as expenses.
In order to evaluate your purchases, it is best to record them in a way that makes sense to your business. You can group them together in different ways. Accurate recording and regular evaluation also mean that those ‘sneaky subscriptions’ or auto-renewal payments don’t get forgotten about.
Evaluate your purchases in a way that recognises what is most important to you and how you run your business. This does not always means cutting costs. It is not always about finding cheaper options. For example, for your business, it might be important that you stand out because you choose to buy locally, choose sustainable options or choose fairtrade. You may choose to spend more on a certain system or software because it makes your business activity more efficient and offers better customer service or experience.
Again, this is not a once-a-year job. Allocate time to ‘don your financial director’ hat and assess your purchases and where your money is going.
Make all decisions based on numbers - allocate time for working on growth and goals
Most of us want to see business growth. We want to know that our plans and dreams are coming to fruition. You can only truly know that if are regularly looking at your numbers – and I mean ‘really looking’ and interpreting what you see.
It is easy to consider the recording of purchases and sales and any other financial element of your business as a chore to be done for the tax system! If you are doing a self-assessment, then yes that is what the annual task is about. However, if you are a business owner, you should be keeping accurate records, keeping track of spending and income, as well as comparing different months to give you key information and to help inform decisions about your business.
Regularly taking time to analyse sales is important. It can also be motivational if things are going in the right direction…and also an early alert system, if things are not.
It is important to regularly review and analyse all of your business numbers because:
- They are most relevant to now – not a year ago or more
- It allows you to make changes before a problem grows
- The numbers are the best source of tracking and supporting business growth
- Any anomalies will be identified asap and this ensures accuracy
It’s also about not just looking at what is happening right now, but also making comparisons. Take a look at your numbers from the last month or the same month last year. Compare the last quarter, the last six months or perhaps even longer. If you have accurate records and easy to access systems, then this is simple to do.
NO MORE BOOKKEEPING STRUGGLES
Little and often is always good advice when it comes to any admin or record keeping task. Make a change today and start doing your bookkeeping as regularly as you can. Do it weekly and your future self will definitely thank you. You will have no worries about submitting your self-assessment or knowing your records are accurate for submission.
Bookkeeping and tax returns do not have to be difficult. I am a strong believer that good time management and the right support is all you need to be up to date with it and…excitingly…you can also use the numbers to grow your business!
If you want support to help you with your new bookkeeping good habit, come and join us in my Facebook group:
While this blog aims to provide helpful information, it’s important to remember that every business and person is unique. So, before making any decisions, we highly recommend seeking professional advice. We want to ensure that you have all the support you need to make the best choices for your situation!
