5 bookkeeping tips that will save you time and money
Bookkeeping is tedious.
There's no two ways about it -
the last thing you want to be doing, especially at the end of a hard days work, is tallying your costs and expenses.
Calculating what to set aside for taxes.
All essential things to track if you want to maintain a healthy and successful business. The trouble is, bookkeeping is a neccessary evil - you cannot avoid it.
But taking an active approach to bookkeeping has many advantages. It gives you:
a clear view of your cash flow
improved financial control
a simple way to manage tax returns
an easy way to track business health
and a means to predict future income and costs.
In short, bookkeeping helps you keep your business alive.
If you are one of the 72% of UK self-employed people who do their own bookkeepping and manage their own taxes, here are 5 tips you can quickly and easily use to make bookkeeping a more financially rewarding exercise.
1) Keep track of your financial data every on a monthly basis
Keeping track of your finances, month to month, allows you to anticipate and manage cash flow.
But leave this task longer than a month and you risk your business drifting into financial trouble - without you realising - and leaving you little time to do anything about it.
Month to month tracking also helps you easily identify and resolve discrepencies - something that will become a time consuming, and painful, task, if left over a longer period.
Tracking monthly can help you spot trends from which you can build up an element of predictability to your business finances.
For example, you may identify that between November and February work levels dip - with this information, you could counter this by setting aside cash from more productive periods.
2) When reconciling, resolve errors straight away
One of the biggest mistakes made in 'Do-it-yourself' bookkeeping is a failure to reconcile accounts each month because it means any errors in your recording are not quickly picked up and resolved.
And this causes a knock-on effect to another serious mistake, and that is to leave a discrepancy.
There should not be even a £0.01 difference between what is in the bank and what is in your books.
- if there is, then do not reconcile.
It’s best to find the source of the problem and fix it.
If you carry the discrepancy across following months; if your books don’t line up with what is in your bank; your financial statements will be inaccurate, your tax bill could be wrong and you could end up with penalties.
3) Plan for major expenses such as taxes
Do you fear the dreaded annual VAT bill?
The sledgehammer moment when you discover the size of your bill and you do the quick mental math to calculate how skint you'll be for the next few months.
You'll be pleased to know this is an easy problem to solve ...
As even tax bills can be anticipated - provided you keep track of your financial records.
The trick is to set aside an amount each month, corresponding to your monthly income.
This will mean you have the money already in hand to pay the tax bill - you'll avoid the single large outlay (and months of hardship).
The amount you set aside doesn't need to relate to just tax -
Because forecasting and creating a simple budget for other expenses like tools, supplies, vehicles, repairs, stationary and maintenance will give you plenty of financial breathing room.
4) Keep your personal finances separate When you run your own business you're often responsible for most tasks, bookkeeping included. To make life easier when recording your finances, and a simple trick to avoid confusion in the long run, set up a separate bank account for your company.
Doing this will save you time and energy when sifting through your expenses, because you won’t need to filter out personal purchases.
It’s also a good idea to have a separate bank card for your business, so when you’re going through your invoices and receipts, you will know that all the expenditure has gone on business-related items - a great tip for helping you speed up bookkeeping.
5) Use cloud accounting software
Cloud bookkeeping software, such as QuickBooks, gives you instant access to your financial information.
As cloud software, it's payable on a subscription basis - this means you avoid making a single large software purchase - instead, paying a much smaller sum, month to month.
Tools such as QuickBooks automate many of the tedious bookkeeping functions - but there is a caveat:
QuickBooks, and other cloud bookkeeping tools, simplify financial management, but they do not replace the manual work of entering neccessary information.
5 bookkeeping tips that will save you time and money
These 5 simple tips alone will save you many of the 120 hours a year the average person spends doing their own bookkeeping.
Plus the cost of buying bookkeeping software.
Whilst reducing the impact of tax bills and other critical business costs.
All whilst simplifying your overal business administration.
But if you do want some advice; if you would like someone to help you with your bookkeepping, business administration or marketing, then why not give me a call?
It won't cost you a penny, and you'll be pleasantly surprised at the ways we can help you save time and money.
Since retaining our services, one of our clients has been able to double their annual income - perhaps we could do the same for you.
But you won't know unless you make giving me a call the very next thing you do.