If it’s your goal to grow a thriving business, it’s vital to have a safe pair of hands handling the accounts. Inaccurate bookkeeping can harm your business and can even result in severe penalties – but having strong financial statements can save you in many different ways.
One interesting thing about being an entrepreneur is that you like to look ahead. You tend always to look for the new opportunity, for the next challenge, for tomorrow’s customers. Mostly, it’s a great characteristic to have. However, it does mean that few entrepreneurs relish breaking their stride to deal with a pile of paperwork.
In footballing parlance, entrepreneurs would be the attacking players; the strikers and wingers. But it’s no good being able to score goals if you also keep conceding them, which is why every good attacking team also needs a strong defence and a great goalie. And in the business world, your goalkeeper is your bookkeeper.
The bookkeeper’s job is to keep rigorous accounts of all financial transactions – everything the business sells, buys, owes and is owed. This is vital, and not just because you need accurate annual financial statements. Good bookkeeping can also help with the more exciting, forward-planning side of things – because knowing the past makes it easier to predict the future.
Here are some of the key things a good bookkeeper should do.
- Keep your business and personal finances apart
If you’re a sole trader you are not legally obliged to have a separate business bank account – but you should have one nevertheless. Otherwise your books will soon be a nightmare to maintain, unless you record every penny of personal spending too.
- Keep clear and separate records
Bookkeeping typically requires at least three ‘books’ (i.e. financial records): the cash book, sales invoices, and purchase invoices.Your cash book records everything passing in and out of the business’s bank account. This record of cash flow makes it an invaluable planning tool, as you can use it to underpin forecasts.
Your sales invoice file keeps a record of all your sales. Keep unpaid invoices together in a separate section.
Your purchase invoice file should record all purchases chronologically, along with the payment method.
- Control your credit
A full sales ledger is a beautiful thing, but if your customers haven’t paid yet, that beauty is only skin-deep. Set strict deadlines for your customers to pay their bills to you, and consider blacklisting repeat offenders if you think they are taking advantage. Chase every late payment, as each is essentially an interest-free loan. Without rigorous credit control, a small business can quickly develop a cash-flow crisis.
- Track expenses
Business expenses can be claimed against tax, so tracking them is essential for cutting overheard and maintaining healthy cash flow. Use a business credit card where possible (as this itself provides a basic accounting system) and keep careful records of all other expenses, categorising them by business activity.
Categorisation of expenses can prove especially important if your business happens to be audited. Numbers on tax returns are frequently estimates so it really helps to be able to provide supporting evidence for these.
- Plan ahead
One of the best reasons to keep track of where you’ve been is that it helps you work out where you’re going. Looking at the past year’s books, you can usually spot the times when a bit more forward planning would have saved you money and stress.Identify the major expenses of the year ahead and fix them in your business plan. Anticipate likely business costs (e.g. insurance premiums or IT upgrades) but always give priority to your tax obligations – you won’t be able to delay these. There may be times when your business seems awash with cash, and you may be tempted to take out more than usual – having a full roadmap of future expenses will warn you to be careful.
Bookkeeping may not sound like the most glamorous role in the business, but ultimately every other role depends upon it. Just as every goal saved is worth a goal scored, every pound saved through diligent book-keeping is as good as a pound earned. Best of all, having a safe pair of hands behind you to take care of the books gives you, as business owner, the freedom and confidence to lead from the front. An accountant can take care of your bookkeeping as well as providing a wide range of other valuable services for your business.
If you are looking for one locally, FMB Consultant offer essential bookkeeping services to ensure steady business operations. With a team of professionals and experienced accounting, allow us to manage your regular administration and bookkeeping needs, get you more time to focus on growing your business. For small talk or discussion please contact:
+62 899 6777 879
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Article Source: Unbiased UK