Maintaining effective bookkeeping practices is easier said than done if you’re a business owner. With a business to run and so many other responsibilities to manage, how can you be certain that your records are as good as they should be?
In this blog, we outline our top tips on how to get bookkeeping right, from keeping accurate records and tracking your expenses to using cloud accounting software to automate processes.
Why is bookkeeping important?
Your bookkeeping responsibilities will vary depending on your business structure, but HMRC requires most businesses to keep accurate financial records throughout the year.
Sole traders must keep records for at least five years after the self-assessment tax filing deadline, while limited companies must keep them for six years or more.
But good bookkeeping isn’t just about meeting accounting standards and staying compliant with HMRC; it’s about taking control of your business finances. By precisely recording all your business income and expenses, you can gain a greater understanding of your firm’s performance.
Our top tips for effective bookkeeping
Separate your personal and business finances
You should always keep your personal and business finances separate. This is a legal obligation for limited companies, but other business structures will also benefit.
Setting up a separate business bank account makes it much easier for you and your bookkeeper to organise your business transactions. It can be difficult to accurately calculate deductions on your tax return if you need to sort through both personal and business expenses.
Separating your finances can also better track your business income, allowing for more data-driven decisions that move your business forward.
Use cloud accounting software
Recent developments in accounting technology mean that the days of using Excel to manage your books are gone.
Most cloud accounting software platforms have built-in automation and integration capabilities, simplifying your bookkeeping tasks and cutting down on time-consuming manual data entry.
By linking your software with your business bank account, you ensure that you’re always working on the most up-to-date financial data. Depending on your chosen software package, you can also take advantage of features such as invoice management, expense tracking and in-depth financial reporting.
Cloud technology also opens the door for more effective collaboration with your accountant, no matter where you are in the world.
Stay organised throughout the year
Record-keeping is an ongoing task. If you want to maintain records that accurately reflect your business finances, you’ll need to update your books throughout the year — not just at year-end.
Maintaining organised records can reduce the amount of time and stress you spend on preparing your tax return.
Part of staying organised is keeping a close eye on upcoming dates and deadlines. Marking these dates in your diary and sending yourself email reminders can help you avoid non-compliance penalties and fines.
Track your expenses
Keeping track of your spending can help you maximise deductions on your tax return. This can ensure that you can substantiate your expense claims if HMRC requests proof.
It’s also important to keep a paper trail for any cash payments you make.
Receipt-scanning apps can save you time on admin by taking pictures of paper receipts and sending the data to your cloud accounting software.
Your accountant or bookkeeper can advise you on your allowable expenses if you’re unsure what you can claim.
Create regular financial reports
Regular financial reporting can also help you stay on top of your business finances. You’ll find it easier to flag and address any errors or inconsistencies in your books if you generate reports on a monthly basis.
This can also give you useful updates on how your business is performing month-to-month.
Hire a professional bookkeeper
As your business evolves, your bookkeeping needs may become more complicated. Staying organised and maintaining accurate records may also be more difficult if your other responsibilities are growing too, increasing the likelihood of mistakes in your books.
If you’re struggling to keep up with your bookkeeping duties, it may be time to bring in a professional bookkeeper.
Our comprehensive bookkeeping services are designed to free up your time and give you more control over your business finances. By combining our expertise and the latest accounting software and tools, we ensure that your books are always accurate and up-to-date.
Want to know more? Contact us about your bookkeeping needs.