Before getting amongst the nuts and bolts of their accounting most budding entrepreneurs think that it will be easy to keep track of the incomings and outgoings of their small business. We’re here to let you know it takes more than having some updated spreadsheet software and having your bank statements for the last year to hand. To keep the accounting manageable for your business you need to take on board some understanding of the accounting basics.
One of the major factors behind effective accounting is the ability to successfully keep records. This is harder than you might initially think and this article is going to show you some record keeping tips that will be easy to implement into your working days.
1. It is vitally important to always keep records for your financial dealings and the first tip we suggest is that you set up a process by which your banking transactions are copied over to a spreadsheet. After a few months of diligent record keeping you’ll be able to use it as a tool for making accurate forecasts. Your bank statements and spreadsheets should be used for more than just records.
2. Be sure to keep receipts for everything that you consider a business purchase so you can prove the validity of your figures to any authority that may ask for them. Remember that the longer you are operating your business the more likely it is that you will be audited and have your tax returns investigated. Before this would have meant keeping your paper receipts neatly filed away chronologically in a folder for easy reference. These days you can scan your receipt and store it all in the “cloud” where it will be more secure than on any desktop computer. With many retailers offering their customers the option of having their receipts emailed to them as PDF attachments it couldn’t be easier and there is no reason not to do it.
3. Set aside a good amount of time each week to sit with your accounts and update them. You may find it difficult at first but the more you do it the easier you will find it to pick up the discipline. It’s always best to look at them when you’re alert and have time on your hands. Working on your accounts at the end of the day when you are tired can lead to mistakes. Mistakes in your accounts can have huge implications for your profits forecasts and lead to incorrect tax returns.
4. Be sure to keep your business accounts completely separate from your personal accounts. If you’re running a limited company, even if it is 100% owned by yourself, you have to bear in mind that the money it turns over is not yours. Do not use business funds to make personal purchases. Payments to your business should go into a separate business account and you should take a salary, paid by your business, into your personal account.
5. Regular checks on your business bank account will show you how your money is being spent and it will also allow you to find any discrepancies that could have an impact on the accuracy of your record keeping.