As a business owner, you know that you must collate all your paperwork each year to prepare your tax return. This can be a much easier process if, during the year, you have been managing your bookkeeping effectively. When businesses start, they often do this themselves.
Still, as the business grows, it is worth considering outsourcing the bookkeeping so that you can use your time to focus on delivering your business.
This blog gives some tips to help small businesses to manage their bookkeeping in-house. Bookkeeping is essentially the process of recording all the income and expenditures of the business. By law, you must ensure that when you submit your tax return, all the information is accurate, so you must keep information such as receipts, invoices, and bank statements. Here are a few things you need to think about:
Keep a record of everything - Every time you make a purchase ask for a receipt and keep copies of all the invoices you send to customers. These financial records need to be stored for up to six years.
Reconciliation process – regularly check your income and expenditures against your bank statements. This will help you identify any mistakes, for example, if a customer has not paid on time.
Use online software – there are lots of different types of accounting software available for small businesses. If unsure of what will be best for you, then speak to your accountant. Some software, such as QuickBooks, have apps which allow you to scan your receipts for expenditures, so you have an electronic record. This helps with the reconciliation process.
Focus on cash flow – if you manage your bookkeeping effectively, you should be able to keep an eye on your cash flow. If customers are late at making payments, you can chase them early on so that you don’t have problems with cash flow later. It also helps you to manage spending; if you know cash flow is low, then you may hold out before making a big purchase.
Plan for paying your tax – once you start to generate profit, you will need to pay tax. By managing your bookkeeping correctly, you can forecast your tax liabilities and start putting some money aside to make the payment when this is due.
By taking the steps above, you will find that bookkeeping becomes much more manageable. Remember, as your business starts to grow, especially once you start employing people, it may be easier to outsource the bookkeeping.
Our team at Watson Knipe support clients with their bookkeeping. To find out more, Click Here. You can call us at 01623 490 120 or email us at