Emily Coltman, 26th January 2016
When you’re running your own business, it’s important to make sure you keep your records and bookkeeping in order. Not only does this help you to keep on the right side of the taxman, it also means you’ll have useful, up-to-the-minute information about your business’s profit and its cash flow.
Emily Coltman FCA, Chief Accountant to FreeAgent – providers of award-winning online accounting system for small businesses and freelancers – gives her five top tips for making sure you stay on the right track when it comes to your bookkeeping.
Track your cash in and out
Remember that cash is the lifeblood of any business. If you don’t know what’s come in and what’s going out, you won’t know if you’ve got sufficient money to pay your upcoming bills or to cover your taxes. If you don’t already do so, try making use of the speed and convenience of online banking. You should find that monitoring your account online makes it quicker and easier to track the money that’s going in and out of your business. You can even download statements from online banking and upload them to FreeAgent, making it even more straightforward to work out where you’re earning and spending money.
You can save time and paper by e-mailing your estimates and invoices to your customers, and chasing non-payments with automatic email reminders. This will also help you make sure you get paid the money you've earned for your work!
Keep on top of your bills
Don’t sour the relationships you have with your suppliers by forgetting to pay your bills. Instead, try to keep track of any bills that you’re not going to pay straight away, and make sure you keep a record of when they’re due to be paid - so that you can pay them before the deadlines. Not only will this help keep your suppliers happy - and you never know when you might need a supplier to do you an urgent favour, such as a rush order - you may also be able to take advantage of early payment discounts. You can do all four of these easily, and produce management accounts, by using a simple online accounting system like FreeAgent.
Track all your expenses
As well as spending money from your business bank account, you’re bound to spend money out of your own pocket on business expenses. But it’s easy to forget to keep track of these expenses when you’re doing your bookkeeping. For example, if you travel to visit a client and buy your train ticket using a personal credit card, remember that this still counts as a cost of your business. If you don’t put it in your accounts, then your profit will look higher than it actually was, and worse, you’ll pay too much tax. Consider using a tool like Receipt Bank to photograph your expense receipts on your iPhone and feed them automatically into your accounts - so you won’t run the risk of forgetting about them.
Keep your records carefully
Make sure that you keep all your paperwork, either as hard copies, or by scanning them onto your computer. HMRC is quite happy for you to keep your business records as soft copies, so long as you can access them readily - but remember that if a document has writing on both sides (such as terms and conditions), you must scan both sides. The exception to that is anything that has a tax deduction written on the piece of paper, such as a dividend voucher, or bank interest certificate. In these cases you must keep the hard copy.
However you keep your records, have a system and stick to it. Make sure that you can easily lay hands on any piece of paper in your system, in case of a query from your accountant or from HMRC as well as in case you need it. Sort documents by type (e.g. invoices, bills, bank statements) and by order such as date or alphabetical or both - rather than just filing them in one big pile.
You may also want to consider using an online accounting system such as FreeAgent to help you manage your record more efficiently. This will also allow you to attach scanned copies of documents such as bills to the entries in the software, which will save you having to look for them later.
Bookkeeping isn’t the most interesting of jobs, but it’s much easier to manage if you make use of all available tools and keep your records regularly updated. It’s easier to do an hour a week than to have to spend a month collecting your information at year end - and you could also save on accountants’ fees by keeping your records and paperwork in perfect order.
Emily Coltman FCA is Chief Accountant to FreeAgent, who provide an award-winning online accounting system designed to meet the needs of small businesses and freelancers. Try it for free at www.freeagent.com
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