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Accountant Emily Coltman has some Valentine's Day advice on book-keeping for small business owners.
Running a business can be a bit like being in a long-term relationship. In the beginning, everything you do with your business is exciting and new, and even the supposedly dull things like doing your expenses are fun.
But once the novelty has worn off and the bookkeeping stops being new and exciting, you might start to find it repetitive and mundane. And once the fire begins to burn out, how can you ensure you don’t end up with a huge pile of paperwork which you just can’t bear to tackle?
Emily Coltman FCA, Chief Accountant to FreeAgent, which provides an online accounting system specifically designed for micro businesses and freelancers, gives her top tips for how to rekindle the passion for your business bookkeeping.
Little and often does the trick
Unfortunately, there’s no way to make your bookkeeping disappear, but you can learn to enjoy doing it. The trick is to do a little bit regularly, rather than leaving a pile of receipts and bank statements to pile up and then having to spend hours organising and cataloguing them.
Try to set aside a regular slot, say an hour each week, to look at your current financial position, create, send and chase invoices and log your most recent expenses. Make it a regular, scheduled part of your week (for example, an hour every Monday morning) and this will not only make the job of bookkeeping feel less onerous but will also help you have accurate, timely, up-to-date information about your business’s profit and cash flow.
Keep it simple
Don’t make your bookkeeping more complicated than it needs to be because this will only take up valuable time. Instead, keep everything simple and efficient.
For example, if you’re paying your costs straight away, such as with a business debit card, don’t worry about entering bills. Put them into your books as bank payments to the appropriate category, for example, if you buy a new power pack for your iMac online and pay with your business debit card, that would be a payment to Computer Hardware.
Entering a bill and then showing that bill as paid would take twice as long, and if you’re paying immediately, you don’t need to do that anyway!
Don’t lose that piece of paper!
If you miss expenses out of your accounts then you risk not paying the right amount of tax you owe! So instead of ignoring those fiddly little expense receipts, make sure that you log them all as you collect them.
We have found that the majority of small business expenses tend to be under £20, but that many small business owners felt these were too small or insignificant to claim. However, those little expenses all add up – so it’s important to stay on top of them.
By using a record-keeping app – or an online accounting system – you may be able to record an expense such as a train journey or cup of coffee as soon as you’ve incurred it. Just photograph your receipts on your mobile phone and attach them to your expense records while you’re on the go, so you’ll never miss out on tax relief again.
Invoice promptly (and accurately)
Invoicing your clients quickly is of the utmost importance for any small business. If you don’t ask for payment once the job is completed, you run the risk of your customers failing to pay you quickly – and this could mean that you run out of cash to pay your bills.
But it’s also important to make sure you get your invoices right. Otherwise you may struggle to get paid. For another, if you’re registered for VAT and are invoice accounting, did you know that if you don’t invoice your customer within 14 days of supplying the goods or service, you have to include the VAT on your return at the point when you make the supply, not as at your invoice date?
Make sure you include time to create, send and chase your customer invoices as part of your hour a week and check whether you could save any additional time by using dedicated invoicing or accounting software. This may enable you to include a link allowing your client to pay you online, create recurring invoices and set up automatic reminder emails to chase your late paying customers – which could speed up your invoicing and help you get paid faster.
Make your systems do the work for you
And while we’re on the subject of tools to help make life easier, you may also want to look at a specific bookkeeping or accounting system to do the heavy lifting for you. For example, could you benefit from using a cloud system that has automated bank feeds, which pull in your transactions from your online bank account directly into your online accounts? That way, you won’t have to log into your bank account, download a file and manually upload it.
Or how about one that enables you to file your VAT return or your Self Assessment tax return direct with HMRC from within the software? Or that allows you to give your accountant access to your accounts so you can collaborate in real time rather than sending spreadsheets back and forward via email or risk losing important data by sharing Google documents?
Bookkeeping may never be your favourite business task, but by making it as simple and as automated as possible, you can at least save yourself the spectre of the looming pile of paperwork to plough through. And that should hopefully help rekindle at least some lost passion for your books.
*Emily Coltman FCA is Chief Accountant to FreeAgent, which provides an award-winning online accounting system specifically designed to meet the needs of small business owners. Try it for free at www.freeagent.com.