Adopting good bookkeeping habits will help minimise mistakes and avoid costly errors. These bookkeeping tips are designed to assist you in balancing your books every month and keeping control of your company’s finances.

This blog post will provide ten easy-to-implement bookkeeping tips to help you stay on top of your finances and set your business up for success. From separating business and personal expenses to utilising the power of accounting software, these tips will give you the foundation to manage your money effectively.

10 – Easy To Implement Bookkeeping Tips

1. Keep Personal and Business Finances in a Separate Account!

One of the most important things you can do for your small business is to keep your finances separate from your personal finances. This means having a dedicated business bank account, credit card, and debit card.

There are several reasons why this is important:

• Financial clarity: Having a separate business account makes it easier to track your business’s financial performance and make informed decisions.
• Tax purposes: You’ll need to track your business income and expenses for tax purposes. Keeping your finances separate makes it easier to determine which expenses are deductible.
• Liability protection: Separating your business and personal finances can help protect your personal assets in case of debts or bankruptcy if you are a Limited company.

A separate business bank account and accounting software let you easily set up a bank feed to import bank transactions automatically. A bank feed reduces the time spent on manual input and errors.

2. Track All Income and Business Expenses

To get a clear picture of your financial health, tracking every business income and expense is crucial, no matter how small. This might seem tedious but will pay off in the long run.

Why is tracking everything so necessary?

• Accurate financial reporting: Meticulous tracking ensures that your financial reports (like profit and loss statements) are accurate and reflect your business’s actual performance.
• Informed decision-making: Knowing exactly where your money is coming from and going allows you to make informed decisions about pricing, expenses, and investments.
• Tax preparation: When tax season rolls around, you’ll have all the necessary information readily available, making the process smoother and less stressful.
• Identifying trends and areas for improvement: Analysing your spending patterns can help you identify areas where you can cut costs or improve efficiency.

Tips for effective tracking:

• Develop a system: Choose a method that works for you and stick with it.
• Make it a habit: Track your income and expenses regularly, ideally daily or weekly.
• Categorise transactions: Assign each transaction to a specific category (e.g., rent, utilities, marketing) to make analysis easier.
• Keep digital copies: Scan receipts and store them electronically for easy access.

By diligently tracking all your income and expenses, you understand your business’s financial performance and lay the groundwork for making sound financial decisions.

3. Use Accounting Software

In today’s digital age, using technology for bookkeeping is smart. Bookkeeping software like QuickBooks, Xero, and FreeAgent can be game-changers for small businesses, automating tasks and providing valuable insights.

Benefits of using accounting software:

• Tax preparation: Many accounting software programs integrate with tax preparation software, making tax time less difficult.
• Automation: Automate tasks like invoicing, expense tracking, and bank reconciliation to save time and reduce errors.
• Reporting: You can easily generate financial reports, such as profit and loss statements, balance sheets, and cash flow statements.
• Accuracy: Reduce the risk of human error and improve the accuracy of your financial data.
• Accessibility: Access your financial information from anywhere with an internet connection.

Tips for Choosing Bookkeeping Software:

• Consider your needs: Consider your business size, industry, and budget.
• Look for features that are important to you: Prioritise features like invoicing, expense tracking, and inventory management.
• Try before you buy: Most accounting software providers offer free trials.
• Consider ease of use: Choose intuitive and easy-to-navigate software.

3. Keep all of your Financial Accounting Records

Meticulous record-keeping is essential for small business owners. Think of your financial documents as a historical record of your business journey. These records provide valuable insights into your financial health and serve as crucial evidence for tax purposes and potential audits.

What to Keep:

• Receipts and Sales Invoices: Maintain records of all business expenses and sales transactions. This includes everything from office supplies and rent to client invoices and payment confirmations.
• Bank and Credit Card Statements: These statements comprehensively overview your cash flow and spending patterns.
• Financial Statements: Keep copies of profit and loss statements, balance sheets, and cash flow statements. These reports offer valuable insights into your business’s financial performance.  
• Employee Business Expense Claims: Require employees to submit expense reports with corresponding receipts for all business-related expenses.

Best Practices for Record Keeping:

• Embrace Digitalisation: Scan receipts and invoices to create digital copies. This saves space and makes it easier to search and organise your records.
• Utilise Cloud Storage: Cloud storage services like Google Drive, Dropbox, or OneDrive offer secure and accessible storage for your financial documents. This ensures your data is backed up and protected from physical damage or loss.
• Establish a Consistent Filing System: Whether you prefer physical or digital files, create a clear and organised system for storing your records. This will make it easy to locate documents when needed.
• Regularly Back Up Your Data: Besides cloud storage, consider backing up your data on an external hard drive or server. This provides an extra layer of protection in case of data loss or corruption.

As a general rule, keep all records for at least six years. This timeframe allows you to refer back to past data for analysis or to address any inquiries from tax authorities.

4. Reconcile Accounts Regularly

Reconciliation is comparing internal financial records with external statements to ensure they match. It is critical to maintaining accurate financial data and catching errors or discrepancies.  

Why is Reconciliation Important?

• Identify errors: Reconciliation helps you identify mistakes in your own records or statements from banks, suppliers, or customers. These errors could be typos, duplicate entries, or fraudulent activity.  
• Prevent fraud: Regularly reconciling accounts can help detect unauthorised transactions or suspicious activity.  
• Improve accuracy: By identifying and correcting errors, you ensure that your financial reports are accurate and reflect the actual state of your business.
• Maintain good relationships: Reconciling with suppliers and customers helps maintain good relationships by ensuring everyone agrees on the amounts owed and paid.  

Types of accounts to reconcile:

• Bank accounts: Compare bank statements showing deposits, withdrawals, and fee records to the bookkeeping software.  
• Supplier accounts: Check your records of purchases and payments against supplier invoices and statements.  
• Customer accounts: Verify that your sales and customer payment records match customer statements and payments received.  

How often should you reconcile?

Ideally, you should reconcile your accounts monthly. This allows you to catch errors quickly and address any discrepancies before they become major problems.

6. Complete Credit Control Regularly

Effective credit control is crucial for maintaining a healthy cash flow in your business. It involves setting clear credit terms, invoicing promptly, and diligently following up on overdue payments. By implementing a robust credit control system, you can minimise late payments and reduce the risk of bad debt.

Modern bookkeeping software offers a range of features that streamline credit control. Automated invoice generation ensures timely and accurate invoicing, reducing the chance of errors and delays. You can set up automatic payment reminders, eliminating the need for manual follow-up and freeing up your time for other tasks.

The software can track customer payment history, providing valuable insights into payment patterns and potential risks. This allows you to identify and address potential issues early on, minimising the likelihood of late payments or defaults.

7. Keep Up to Date with Bookkeeping Duties

As a small business owner, staying on top of your bookkeeping tasks is crucial for maintaining accurate financial records and making informed business decisions. However, it’s easy for bookkeeping to fall by the wayside when you’re busy running your business. That’s why establishing a consistent routine and scheduling regular time for bookkeeping is essential.

Think of bookkeeping as a continuous process rather than a once-in-a-while chore. Dedicate specific times each week or month to updating your records, reconciling accounts, and categorising transactions. This prevents tasks from piling up and becoming overwhelming. By staying organised and completing tasks regularly, you’ll have a clearer picture of your financial position, allowing you to identify potential issues early on and make necessary adjustments.

8. Bookkeeping Tips – Forward Planning

As a small business owner, planning is essential to successful business management. It involves anticipating future needs and challenges and proactively preparing for them. A key element of planning is creating cash flow forecasts, which are projections of your business’s future cash inflows and outflows. These forecasts provide valuable insights into your expected financial position and help you make informed decisions.  

Preparing a business cash flow forecast will help avoid a cash flow crisis, as you will see when the business has the funds available.

9. Keep Detailed Accounting Records of Petty Cash

Small business owners must keep detailed records of their petty cash transactions. Not only should you always insist on receipts, but you should also record every time you dip into your petty cash. If you reconcile your petty cash regularly, you minimise the risk of theft to the company. This is a particularly handy bookkeeping tip as you always stay on top of your petty cash transactions.

10. Outsource your Bookkeeping if you Need to

Running a business is a lot of work. Not only do you have to keep track of your inventory and sales, but you also have to handle your finances. For many business owners, bookkeeping can be a time-consuming and daunting task. If you don’t have the knowledge or the time to handle your business bookkeeping, consider outsourcing this task to a professional.

A bookkeeper can help you stay organised and ensure accurate financial records. This can free up your time so that you can focus on other aspects of running your business. In addition, a bookkeeper can offer valuable insights into your business finances. With their help, you can make informed decisions about where to allocate your resources. So, if you’re feeling overwhelmed by your business, outsourcing your bookkeeping might be the answer.

Conclusion to Small Business Bookkeeping Tips

Small business bookkeeping is the heart of your business. Businesses that follow good bookkeeping practices are well-governed, and financial information is readily available for accurate decision-making. Following these bookkeeping tips will boost your business’s chance of enjoying financial success. Automate wherever possible and ask your accountant for advice on which system would suit your business best. This will ensure that your Annual Financial Statements are timely and accurate, giving confidence to investors and shareholders alike. 

For more information on maintaining your accounts, check the HMRC website or read our bookkeeping basics section.

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Are you wondering what the importance of bookkeeping is? Bookkeeping can be confusing and time-consuming. If you’re not an expert in this field, you may end up spending more time correcting mistakes than you spend recording your profits. But there are some basics that you need to know if you want your bookkeeping to be good. Here are some bookkeeping basics. Get started with these tips.

Why is Bookkeeping Essential to your Business?

Bookkeeping is essential for helping you keep track of your finances. Aside from the fact that you’re required by law to keep accurate accounts and records, accomplishing this also will save you hassle in the future. A well-implemented bookkeeping or accounting system creates a detailed financial roadmap for your company. It provides you with the information you need to make crucial decisions regarding your finances.

Personal and Business Accounts

When it comes to accounting, you should remember to have separate files for your personal and business accounts. If you have individual bank accounts, you’ll be able to determine your profit and loss situation quickly at tax time. You can also make use of them during audits. For instance, if you have separate books for your personal and business use, you’ll be able to use them as a legal defence when anyone probes into your accounts.

In keeping your financial records clean and neat, you must make sure to create a standard bookkeeping process. Keep all your receipts and payments in excellent formats that are easy to read. Also, label each document with the name of the person who received it, the date, and the amount. If you’re using a computerised accounting system, mark each document too. This will allow you to match your company’s accountants and bookkeepers’ names to each financial record.

Hiring a professional bookkeeper

A professional bookkeeper can provide many valuable services that will make your bookkeeping more efficient. The most obvious one is to eliminate errors caused by missed calculations or data entry. An experienced bookkeeper will make sure that all of your accounting documents are error-free. He or she will make sure that all the financial records are up to date and that all of them are presented correctly.

If you want to improve your bookkeeping practices, you might consider hiring a company specialising in electronic bookkeeping. An electronic bookkeeping system can streamline your bookkeeping practices because it removes the paper from the picture. Instead of recording financial information manually, an electronic system will record everything in digital format.

Using an electronic system means that all of your financial statements can be downloaded immediately, rather than having to send paper records back and forth to your accountant and bookkeeper. This convenience has resulted in more people taking advantage of electronic bookkeeping, which has led to their increasing use across the country.

Manual vs Electronic Entries

When it comes to bookkeeping and accounting, there is a considerable difference between what should be done for business finances and what should not be done. One of the best ways to avoid the mistakes made when it comes to your finances is to make sure that your receipts are correctly entered into your computer records.

The problem with making manual entries into your accounting system is that it’s easy to accidentally enter wrong amounts, which then causes the incorrect item to appear in your ledger. If this happens, your tax return will be invalid, and you’ll end up paying a lot more tax than you should have been paying. By using a professionally designed accounting program, all of your receipts will be entered appropriately, and you can ensure that you don’t accidentally double write anything.

Instant Reporting

If the bookkeeping is up to date and you are using a good accounting system, you will be able to get reports instantly. It is important to see the position of the business. Have you got enough money to pay outstanding invoices? Who owes you money? How much do you owe suppliers? If your bookkeeping is not up to date, it can be easy to miss a customer that owes money.

The Importance of Bookkeeping for Business Planning

By having your correct bookkeeping figures, you can plan. You can produce cash flow forecasts, which will help you to review the plans for the business. There may be times when cash is tight and financial plans need to be put in place. Perhaps you are looking to expand the business, producing the reports will enable you to decide the best time.

Tax Planning

There are many different business taxes it doesn’t matter if you run a limited company or self-employed. Ensuring you have enough money to pay for taxes is important. By providing your financial figures, you can calculate the taxes that need paying.

Importance of Bookkeeping – Required by Law

All business are required to keep financial records by law. Most businesses need to keep records for six years. When providing figures to Companies House or HMRC, you will need to keep backup records as well. These can be either paper or electronic records. HMRC may carry an inspection of the records.

Financial Analysis

When all your bookkeeping is complete, the figures can be used for financial analysis. Financial analysis is used to see how well the business is performing during a period.

How often should I complete Bookkeeping?

It will depend on the size of business you run. It is normally better to complete bookkeeping little and often. It makes it easier when you need the reports and figures. It is important to get at least your sales invoices sent on time.

To help with bookkeeping on a regular basis, good accounting software is recommended. If you are self-employed QuickBooks and Xero, both offer excellent software that can be used on your mobile device.

If you are still wondering about the importance of bookkeeping for your business, read our bookkeeping basics section.

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In this blog post, we’ll cover why getting a separate business bank account if you have a small business might just be the best move for you and your company.

Self-Employed Bank Accounts – Do I need a separate business bank account?

As self-employed individuals, it is not legally necessary to open a business bank account; however, it can become increasingly easier to handle your finances if you do. A business account provides a place to store funds, separate from any personal bank accounts you may have. This makes it easier to organise and track expenses and make other financial calculations.

Limited Companies Bank Account

As a limited company, having a business bank account isn’t just practical and wise – it’s legally required. Are you doing your tax return? YouYou’lled to be able to provide evidence of your limited company transactions from your business bank account. As a Limited company is a separate legal entity, it is required to have its own business bank account.

This account is distinct from anything else you may have for personal use – such as savings or current accounts – and helps protect yourself and the limited company by providing clear records of limited company-specific transactions.

Many banks will offer limited companies special advantages, such as favourable interest rates, when opening these kinds of accounts, making them an even more attractive option. So if you’re a limited company owner, take the time to research these types of accounts to make the most out of managing your limited company’s financials.

Business Bank Account Benefits

There are many advantages of having a business bank account, but here are our top 10:

1. Keeping track of finances – It is easier to see all your business transactions in one place. You will also know from the balance how much money the business has available.
2. Online Accounting Software – Modern cloud accounting packages include online bank feeds if you choose the right software. It can save lots of time, as the bank transactions are imported directly into your software, and if set up correctly, you may only have to click one link to post the transaction to the accounts. Some of the best accounting packages on the market are Xero, Quickbooks and Sage.
3. Claiming Expenses – It is important to claim all your business expenses. Putting all your costs through the business bank account will ensure that it is all included. There may also be additional expenses to claim, e.g. mileage and other sundry expenses. Further information is available in the business expenses section.
4. Bank Charges – Most banks offer free banking for new businesses for either 12 or 18 months. You can claim bank charges through the business if you have a separate business account. But you can’t claim if it is a personal account.
5. Makes it easier for HMRC inspection – HMRC do inspect for VAT and taxation. If you are unlucky enough that they choose you for an inspection, it is easier to prove transactions if they are all in one account. Mixing your transactions with those of the business will make it much harder.
6. Save money on Bookkeeping and accountants – If you employ the services of a bookkeeper or accountant, it may take them longer to plough through your paperwork, trying to confirm if a transaction belongs to the business or not.
7. Access to business finance – If you only have a personal account, it may be very hard to get finance approved. Having a business account will allow credit history to build up, making it easier for banks to approve loans and overdrafts.
8. To look professional – Having dedicated accounts means that clients may make payments to your business name. If you are making a payment to a supplier, it is also easier for them to confirm who the payment is from.
9. Banks terms and conditions – In your bank’s terms and conditions, there may be a clause that states it is for personal transactions only.
10. Accepting Credit and Debit card payments – As a business, you may need to accept debit and credit card payments. A few apps allow this, but most will need a business bank account.

What should I consider when choosing a Business bank Account

There are several options for choosing the best bank for your needs. Some people prefer to use the same bank for both personal and business needs. It may not be the cheapest and best option.

Money saving expert is a great website to see the best options for a bank account. They list all the best banks and options available. Many will have no banking charges for a set period for a new startup.

Below is a list of things to consider when choosing a business bank account

• Business Advisor – A few banks offer a business advisor, it is worth seeking their advice if it is available.
• Overdraft – Many companies need to have a business bank account with an overdraft. This is so the company can continue operating if it does not have enough money to cover all its expenses. For some accounts, this service is automatically provided. For others, you will need to apply for it.
• Banking Fees – Check the monthly fees as well as the transaction charges. Charges do vary from bank to bank.
• Accounting Software – some business bank accounts offer free accounting software. For example, the Royal Bank of Scotland and Natwest provide a plan with FreeAgent.
• Business Resources – Check out any business resources the bank may offer. This could include workshops, webinars or even discounts on business services.
• Online Banking – Many banks now offer online banking and mobile apps
• New start-up deals- Look out for special start-up offers. These might include a period of free banking or cashback on certain products and services.
• Customer Service – Check out customer reviews and ratings. You want to be sure that the bank you choose has good customer service and is there when you need them.

How to Open a Business Bank Account

Most Busines bank accounts have an app available which you can use to apply, the other options is via their website or go into branch.

The bank will need information to prove the sole-trader or directors of a limited company. This includes ID, Proof of address and their company registration details

Once the application is in place and you are accepted, you will be issued with a sort code and account number for your business bank account. You will usually have to open an account in person as this allows banks to check identity documents

The bank may have other required information, so it is worth checking when making an appointment.

5. Tips for managing your business finances with a business bank account

1. Have a separate bank account for your business

This will help to keep your personal and business finances separate. This will also make it easier to track your expenses and income.

2. Keep accurate records of your income and expenses

This will help you to stay on top of your finances, as well as provide evidence for tax purposes.

3. Use accounting software with a bank feed

Accounting software will help you to keep track of your finances and will save a lot of time as all the bank transactions are brought into the software.

4. Monitor cash flow

Make sure that you keep track of your cash flow and have a plan in place. Make a cash flow forecast, we have a free template available.

5. Have a budget

Having a budget will help you to stay on top of your finances, allowing you to plan ahead and make sure that your business is on track.

6. Have an emergency fund

Having some extra cash available will help you to continue running your business if something unexpected happens

7. Pay suppliers on time

Paying suppliers on time will help to protect your credit rating, as well as avoiding any late payment fees.

8. Use a debit card for company transactions

This will help you keep track of what is being spent on the company card and can be helpful when reconciling accounts at the end of the month

9. Direct Debits

Set up direct debits for regular payments such as insurance, rent, tax and more. This will help you make sure that these payments are made on time and avoid any late fees.

10. Mobile Banking App

Most business accounts have an associated app that allows you to manage your account on the go. This is a great way to keep track of your finances.

FAQ on Business Bank Account

Can I use my personal bank account for my business?

If you are self-employed, either as a sole trader or partner you can use your personal bank account. Using your personal account makes it harder to track transactions but it is possible.

How can I claim expenses made from my personal account?

If you have a separate account for business, but make payments for some items from your personal account, you can claim these back using an expense claim form.

What is the best bank account UK?

As each business is different, there is no one solution fits all. Complete your own research to find the best account for the business.

Business Bank Accounts Conclusion

Starting a business can be difficult, but having the correct tools in place can make the process much easier. In this article, we have outlined what you need to do to set up a business bank account and some tips for managing your finances.

Having a separate bank account for your business will help to keep your personal and business expenses separate and make it easier to track your income and expenses. using accounting software with a bank feed will save time as all transactions are brought into the software. If you have a limited company you can’t use your personal bank account as the business its a separate legal entity.

The main advice is to do your research and find the best banking options for your business.

For further details about a separate business bank account, read about business banking.

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