With up to date accounts and a sound system in place, you’re free to spend time building a business instead of worrying about day to day finances. Sorting out muddled accounts can seem like a huge challenge, but when approached systematically it’s not too difficult.
Decide on a System
Accounting systems should be a simple as possible. There’s no point running complicated software if all you need is a simple record of what you spent, what you earned, and what you owe.
Muddles happen mostly because people are not sure what they should do, and how their records should be organised.
- Cloud Accounting packages are scalable, so you can use just the sections you need, adding more as the need arises. Upsides are their simplicity and the peace of mind that comes from knowing your records are backed up in the cloud. Downsides include the monthly subscription charge, but worth it if you can’t trust yourself to reconcile bank statements or keep paper records in order.
- Manual accounting works for some sole traders or freelances who like having a physical record to update. Most High Street retailers sell accounting or bookkeeping ledgers.
- An alternative to a physical book is a simple spreadsheet that you can organise in the way that feels most logical to your personal needs.
Decide on a system before you start trying to organise your financial records, then file or update each section as you go through your backlog of accounting tasks.
Keep Accurate Records – Daily
Online banking services help you keep track of daily accounting so you can quickly see numbers, but numbers are not everything. Whatever type of accounting system you’re using, you’ll also need to accurately explain how money was spent and what it was spent on, whether it was a capital expense, petty cash or stock purchase for instance. Earnings need similar explaining, and ideally you’ll track incoming money against issued invoices.
These are daily tasks for most businesses, although some can get away with updating every few days or weekly.
Save and File Receipts
These are your proofs of purchase, and should be logged against the actual expense they relate to. One way of keeping track is to photocopy or scan each receipt (it’s a good idea anyway since ink fades over time) then note on the printed copy details such as what category the expense falls into (needed to claim tax deductions). Highlighting the date also makes it easier to pick out that detail later.
It’s worth noting that HMRC will accept digital images of most receipts and some business documents, so if you prefer to go all digital with your accounts, you can do away with the paper copies. Erring on the side of caution is always wise with HMRC, so double check before disposing of paper records. Just make sure your virtual accounts are backed up regularly and securely.
Hire a Bookkeeper
If accounting is really a chore and you find yourself constantly in a state of catch up, it’s worth considering a bookkeeper to help keep your records straight. Bookkeepers don’t do the job of accountants, which is a common confusion.
- Make your business finances more efficient by managing documents and maintaining inventory control processes.
- Record the daily transactions that go through the business, either retail or other.
- Send out invoices, manage your accounts receivable ledger and chase payments.
- They’ll keep an eye on your cash flow and offer advice if they foresee any problems.
- They will maintain all your books and prepare them properly for an accountant to use when preparing tax returns or offering business advice.
With accounting being a legal business requirement, it’s not worth trying to dodge or shortcut the process. If you’re determined to get your books in order this summer, make a start today and do a bit each day until your records are up to date and organised.