Top 10 tips for book-keeping success.
A robust book-keeping system will be essential if you’re to run business efficiently. No matter how big or small your business, you should ensure that your record keeping is up to date and accurate. This will help you make informed decisions regarding the financial standing of your business. Read on as we list the Building Legacies top ten tips for book-keeping success.
ONE: Block out book-keeping time in your calendar.
You know it needs to be done, you know what needs to be done, you just need to dedicate time to do it.
Whatever your system is, ledger, Excel, or dedicated software, it’s too easy to fall behind in recording your transactions. If you delay for too long, it’s easy to forget what certain payments were for.
Don’t delay doing book-keeping until some unspecified time when you’ll get around to doing it. It’s easier, and less stressful, to keep to a weekly, or at least monthly, book-keeping slot in your calendar. Allocating time will help keep the book-keeping manageable, efficient, and accurate.
TWO: Keep personal finances separate from business finances
It’s a shame this one is in second place as this is super important; however, when you think about it, you need to set aside time so you get around to opening that second bank account dedicated to business money.
If you don’t keep personal money separate from business money things can quickly get chaotic. Like many SMEs, you’re probably responsible for just about everything, including book-keeping. Life will be easier if you use one bank account for personal use and another bank account for your business. Legally, if you’re a limited company, you don’t have a choice as the business must have its own bank account.
Consider having a separate credit card for your business. Separate bank accounts and credit cards make going through your invoices and receipts so much easier. You’ll know all the transactions are on business related activities and avoid having to ask yourself, “was that £50 I spent last week for me or for the business?”
THREE: Use accounting software that meets the needs of your business
You might have a business that manages just fine using Excel or even an old school ledger; however, as your business grows, your book-keeping system may need to get digital. Additionally, with HMRC introducing making tax digital for vat, you may find that software will make life easier. You’ve probably heard of the popular options like Xero or QuickBooks, but check out the Google search results for making tax digital compliant software for more information and choices.
FOUR: Budget for tax
Hopefully, you’ve made a profit; however, all of this profit may not be yours as there could be some tax to pay. Try to budget for this as you go. This way, when tax payment day comes, you’ll have squirreled away enough money to pay your tax bill. It’s not easy, you need to be disciplined, but setting aside 20% of all income means you should be able to pay any tax due without difficulty. If you can’t do 20%, any amount is better than none at all.
FIVE: Use book-keeping to track actual performance against forecasted plans
Do you have a cash flow forecast? If not, you should. How else can you track real-life trading against any forecasted plan? Maybe you call it a project budget or tracker
Having that financial forecast or budget, and tracking your progress against it is one of the most valuable book-keeping exercises. It means you’re not just recording what you’ve done, you’re looking at where you’re going and measuring your progress towards the goals you’ve set. If you have no cash flow projections, look out for future Building Legacies workshops on the subject. If you have no set goals, get yourself along to one of the regular Building Legacies 90 Day Planner workshops.
SIX: Keep everything
Keep a paper or digital record of every business transaction. Invoices, receipts, PAYE records if you have staff… everything.
Create a filing system and file paperwork as you go rather than shoving it into a drawer for later. This will also help with tip number seven coming up next.
It’s basic stuff; however, it bears repeating that you should back up all digital records. Remember, there are two types of hard drive: those that failed, and those that will fail. The usual free cloud storage solutions will provide you with more than enough space.
Keep your records safe. HMRC may ask to see your records to check that you’re paying the correct amount of tax. HMRC can go back into your records for six years, so keep hold of everything for at least six years. On a plus point, it’s quite a nice feeling on year seven when you can start to shred stuff.
SEVEN: Be consistent with data entry
We’ve all done it, but inconsistencies with duplicate entries and/or missing out an entry entirely will cause confusion. This is all the more likely to happen if we get into a habit of binge book-keeping. This nicely introduces tip number eight.
EIGHT: Do a little, but do it often
Book-keeping is not the most exciting part of running your business, but give yourself a minimum of twenty minutes on the task before giving up. If after twenty minutes it’s all too much, you can give yourself permission to walk away.
Scroll up to revisit tip number one, remember to schedule in another twenty minutes minimum into your calendar.
NINE: Don’t over categorise
Avoid getting caught up in too many details. For example, put staplers, printer ink, pens, paper, envelopes, etc all under “office stationery” as there is no need to create separate categories for each item. However, avoid throwing everything into categories called “general” or “miscellaneous” as this can lead to you and/or your accountant having to unpick your work.
TEN: Hire a reliable book-keeper
You know what? Try as you might, book-keeping might not be your thing. In that case, consider hiring a reliable, professional book-keeper.
Neil Leslie is a Business Growth Manager (BGM) for the Building Legacies programme and specialises in supporting clients who make, create, and innovate.
Neil provides the following areas of support to his Building Legacies clients who want to turn creative capital into actual capital: business planning that turns complex ideas into relatable, fundable stories; financial planning using words, pictures, and numbers; process planning, aligning efficiency with ambition.