With your own bookkeeping it can be hard to know where to start, especially if you are regularly playing catch up. If you are wanting to manage it yourself, we have provided 5 tips here to help break it down!
1) Separate out your personal and business transactions. As a Limited Company you will need to have a business bank account, but you must try not to use this for your personal transactions. If you do, these will be listed through your Directors Loan Account which you will need to repay at the end of your tax year, or face interest charges, so it is best to not get in the habit of using your business bank account. If you are a sole trader, you don't need to get a business bank account, you can use your personal one, however, this can make it very difficult to separate out your income and expenses. There are many great small business bank accounts out there so we would recommend you set one up. If you would rather keep a personal account going, we recommend you go through your statement as a minimum once a month and highlight all your business transactions, make sure you have the receipts to back it up and keep them together in a file. This will make your year end tax work a doddle!
2) Keep hold of everything. It is so important to keep copies of your sales invoices and your purchase invoices as well, whether they are paid from your bank, your credit card, cash or by an employee through expenses. If you have a reasonable amount of transactions, it could be worth considering cloud accounting so you can store copies of your documents within the software and not worry about keeping paper files going. A good email system can help you file things easily too. The best way to think of it is any transaction going through your bank should have paperwork/an email or something to back it up.
3) File your Sales and Purchase invoices separately. Sales Invoices should be stored in number order and purchase invoices can be stored in a method that suits your business. Cloud accounting can help organise your files for you.
4) Keep up to date and on top of things. This can be easier said than done, but a quick reconciliation once a week, to make sure you have all the documents on your bank statement and can categorise them into the correct expenses, will go along way to helping you keep on track. If you aren't in a position to use software, keep a spreadsheet logged with all your income and your expenses and keep it up to date. This will also help you to understand your business at any given moment and to know whether your profits are looking good or whether you need to scale back your expenses.
5) Keep on top of your credit control. It is so important to regularly review your outstanding customer payments but also your supplier ones too. Have a plan of when you a likely to get paid by your customer and when you can pay your suppliers. Having a weekly or monthly cash flow plan, can really help you to map out the best times to pay your bills without leaving yourself low on cash. It is important to keep on top of your supplier payments to keep those business relationships going. It is just as important to make sure you are being paid by your customers too. Using Cloud Accounting can help do this for you by sending out automatic payment reminders, or set up a spreadsheet to know which invoices have been paid and which ones are outstanding. Have a clear procedure in place for chasing your sales invoices, as this will really help you stay on track.
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