How to Keep the Books for a Small Business
Best practices for keeping clean books
We know that the process of maintaining your company’s financial records can seem overwhelming, but we’ve put together some tips on how to keep books for a small business so that you can increase efficiency and power growth.
Get the right software
When you’re setting up your accounting, it can be tempting just to opt for the cheapest deal in order to save money. However, cloud accounting software can do most of the heavy lifting for you if you choose the right one.
You will want software that provides access to real-time financial data, laid out in a simple and effective manner. Most good-quality accounting software will be integrated with Xero or QuickBooks so you can view everything in one place.
Ensure you have accounting support on hand
Whether you opt for a more traditional accountant or accounting support which comes as part of an accounting platform, you should make sure that you have access to an expert who can advise you. Otherwise, you can quickly become overwhelmed with the various bookkeeping processes and may be more likely to make a mistake.
Track your expenses
This might seem an obvious point to make, but it’s important to separate business and personal expenses right from the very start. HMRC state that you can claim allowable expenses for your business using the “wholly and exclusively” rule – this includes any costs that are incurred solely for business purchases.
Make sure to keep a record of your expenses in your accounting software rather than just manually storing your receipts. This will make it much easier when you come to complete your year-end accounts and need to total up your expenses.
Invoice for everything
Regular invoicing is essential for small business bookkeeping. It helps to maintain your cash flow, but it also means that you will be able to produce accurate and up-to-date accounts when required. Invoice everything, even if it seems like a casual transaction, and send your invoices well in advance so there is time for the payment to be received.
The best way to send and track invoices and reminders is through your dedicated accounting software. This allows you to view everything in one place and stay up-to-date with the payments that have been made.
Understand your taxes
Another area of small business bookkeeping which will require your attention is your tax accounting. You need to be aware of your company profits to work out how much Corporation Tax and VAT you will need to pay and ensure that you are compliant.
A final thing to consider when it comes to keeping your small business’ books is your year-end accounts. If you’ve been keeping your financial records up to date and accurate throughout your financial year, this shouldn’t be too difficult at all. You can read more on this in our year-end accounting checklist (link), but you will need to produce a profit and loss account, a balance sheet and relevant footnotes.