As a small business owner, the responsibility of managing all aspects of your operation can be challenging.
Whether you work in fashion retail or are a small marketing consultancy, running a small business offers owners and company directors unadulterated freedom and control when it comes to the logistics and coordination of their business – but as a result, also demands commitment, time and energy.
Balancing each and every aspect of your business is of the utmost importance, particularly when it comes to managing your finances. While it’s always good practice to have a dedicated bookkeeper employed, some business owners decide to do this themselves or outsource the activity to our bookkeeping team at Berley. Our bookkeeping service can be tailored to match your needs and we can also extend to a full accounting service including detailed monthly accounts and costing records. Payroll processing and VAT return preparations are also options that we can help with.
Bookkeeping tips for small businesses
Do little, often
It might be the simplest piece of advice you receive, but keeping on top of your finances is one of the best practices a business can have. Staying up-to-date with your business’s daily transactions, expenditures and income equates to a better understanding of your company’s operations and business dealings, as well as a less stressful overall accounting experience. In order to maintain the smooth operation of your business, a bookkeeper should perform the following tasks:
- Log daily financials: this encompasses the recording of day-to-day transactions and a daily income/revenue report, which should be logged in the company’s ledger.
- Handle the accounts, both payable and receivable: the bookkeeper is responsible for the sending of invoices, managing accounts receivable as well as making payments to suppliers and for expenses.
- Oversee cash flow: one of the primary responsibilities of the bookkeeper should be to protect the balance of revenue to expenses – meaning your company doesn’t run out of day-to-day money.
- Prepare the books for your accountant: essentially, it’s the job of the bookkeeper to maintain the accounts so that the accountant can complete the company’s tax returns – i.e. keeping them valid and up-to-date.
As well as this, reconciling your accounts each month is recommended in order to formulate a concrete understanding of the business’s performance. One of the simplest and most straightforward ways to ensure that you’re able to keep on top of your financial duties as a bookkeeper is through the use of a dedicated accounting software platform.
Use a cloud accounting software platform
With the imminent introduction of the Government’s Making Tax Digital legislation, which comes into effect on April 1, 2019, for all VAT-registered businesses that operate above the threshold (£85,000) and April 2020 for all other businesses – migrating your financial records to a cloud accounting software platform is of the utmost importance.
Making Tax Digital represents a complete overhaul of the current tax structure under HMRC, with companies now required to lodge quarterly financial reports as well as an annual report – meaning there is less room for error and more likelihood that your business will receive the greatest return on its tax payments.
Using cloud accounting software is a highly effective way to manage your finances, as it makes updating and reconciling your finances a seamless affair. If your business chooses to use a platform with daily automatic bank feeds, whereby your bank statement lines feed into your accounting software, you’ll have an overview of the cash in the bank and ready to reconcile.
Not only does cloud accounting ensure that your finances are more easily manageable, but it’s also an effective mechanism for protecting your company’s data – with many platforms now using sophisticated encryption technology, you’re less likely to encounter fraud or cybercrime.
As a partner of Xero, our specialist team at Berley Chartered Accountants can assist you with migrating your business’s finances and setting up your cloud accounting software, as well as providing bespoke advice as to how you can make your bookkeeping as efficient as possible. You can read about Xero on this page ‘Get the most out of Xero with Berley’.
Keep your finances separate
It should go without saying that keeping your personal and business finances separate is good practice, however, many small businesses and start-ups encounter this problem in their formative stages without realising the possible ramifications, which can pose significant problems when lodging your personal and company tax return at the end of the financial year.
As soon as you’ve established your business, you should set up dedicated business accounts. This means banking and credit cards in the company name to avoid any confusion in the long run. Mixing expenses and income between owner and business can be incredibly problematic when it comes to reconciling your business’s financial situation – particularly when trying to manage and understand the business’s income when cross-referenced with your own personal expenses and vice versa.
Trying to gauge the standing of the company when these finances aren’t separate is also incredibly difficult, which is why it’s always advisable to make a clear distinction before you start operating. For assistance with setting up your small business’s accounts, Berley Chartered Accountants can provide advice regarding the best solution according to your business’s structure.
Monitor time sheets
One of the primary expenses a small business will incur is employment. Your employees are vital to the operation of your company, so getting the most out of them is of the utmost importance. If you are billing your customers on an hourly or per project basis, one way to manage time sheets is through the use of time tracking software that will log your employees’ hours.
There are a number of platforms that provide this software, with many of them cloud-based. Implementing this technology facilitates a more accurate log of your employees’ work hours, which represents a sound tool for tracking hours which have a direct impact on your profit and loss statement. In addition, they can also minimise your expenses with respect to casual and part-time employees.
Aside from the obvious benefits of getting a more precise insight into the hours being worked by your employees, these platforms also offer a simpler way to manage overtime, sick time and holiday time – providing a comprehensive platform for managing payroll and improving cost-efficiency.
Liaise with your accountant
For many businesses, an accountant is perceived as a superfluous expense with some business owners believing that they can perform this role themselves. While this might be true for someone with an educated knowledge of finance and tax, for those without, not hiring an accountant can be a significant oversight if you’re looking to maximise profits and efficiency.
An accountant can help you to manage tax returns in order to receive the greatest tax relief, they’re also able to analyse your company’s financial records in order to make astute business recommendations for growth and expansion. Many accountancy firms also offer bookkeeping services so that businesses can focus on strategy while the accounts are taken care of.
At Berley, we are London’s local chartered accountants for entrepreneurs, small businesses and start-ups and we can provide bespoke bookkeeping and accounting services for companies looking to gain an advantage in what is the most competitive business market in the world. As the start-up capital of Europe, London represents one of the most difficult places for a small business to succeed – which is why our services could be of value to you.
In addition, we also help small businesses on business finance solutions, funding options and restructuring. Give us a call on 020 7788 8261 today. We look forward to discussing business with you.
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