Every small business wants to make higher profits. And the most commonly prescribed solution for doing so is boosting revenue, which is vital, of course. But did you know your books of accounts contain a wealth of untapped potential for cost reduction and an improved bottom line? Whether it is knowing what costs to claim, finding processes to automate or choosing the most optimal supplier to work with, your books hold all the answers and then some – as long as you know where to look. The key is maintaining complete and accurate records at every point. In this blog post, we give you our top tips to accomplish small business bookkeeping efficiently:
1. Keep records of everything
First things first – record every single sum of money coming in or going out, and note the relevant details like who made the payment and to whom, how the payment was made, whether any further sums are due, and so on. That way, you can always refer back and check for discrepancies in your books.
2. Keep tabs on all business transactions
Particularly as a small business owner, it can be tempting to use a single account for your personal and business transactions. However, you should always make the extra effort and set up a business account. This way, you have all your business expenses grouped to collate the receipts and claim the appropriate amounts from HMRC as tax-deductible.
3. Prepare monthly reports
By monthly reports, we primarily mean the balance sheet and the profit and loss statement. And yes, doing this on a monthly basis may not be fun when you have to do it yearly anyway. However, investing that extra effort will give you real-time insights into how your business is doing every month and power crucial decisions.
For instance, if your cash reserves are low, you may decide to postpone any big equipment purchases until the following month or quarter. And if you see that your accounts receivable is dominated by customers who are consistently late in paying their invoices, you may want to consider transferring your business to more reliable customers.
4. File invoices and bank statements in order
Your accountant’s time is precious – as is your money. Suppose you submit your invoices and statements in a slapdash manner with incomplete information or in a muddle. In that case, they will take longer to chase them down individually, figure out which dates and categories they belong to and then sort them correctly.
And you are the one who has to pay for that extra time! Plus, sorting your documents is not that hard as long as you follow a few consistent systems. For instance, you can sort suppliers alphabetically and then classify their invoices into “paid” and “unpaid.
And for customers who owe you money, you can sort the invoices by the due date so you know whom to chase and in what order. This makes your accountant’s job easier and also avoids the risk of fines from HMRC owing to incomplete accounts.
5. Have a customer management system
Every business receives vast customer information across multiple platforms and mediums. Rather than waste time trying to find the right information at the eleventh hour, you should invest in a system that stores all customer data in a single format.
This makes it much easier to tie relevant small business bookkeeping data to them, such as when the last invoice was due or whether there were any changes to payment terms.
And if you sync this system with your bookkeeping software, you can give your in-house accounting team or an outsourced bookkeeping services provider a single linked file with all invoices matched to individual customer data. Simple as can be.
Subscribe to our newsletter
6. Track your processes to see how much of your time they consume
Often, small businesses lose hours every month on processes they do not need. We recommend keeping tabs on every business process of yours, whether big or small, for at least three months. After that, examine and evaluate each one.
What are you spending the most time on? Is that the best use of your time? How can you optimise the time and effort spent? For instance, you can use a time tracking tool to monitor daily efficiency and track deadlines, and a project management solution to help your team members collaborate and hit milestones according to plan.
Another suggestion is to replace your business landline with a VOIP service that can forward incoming calls to your mobile at no extra cost, so you can stay on top of things even when you are not at your desk.
7. Choose the right bookkeeping software
You will be amazed at how much easier seemingly onerous small business bookkeeping tasks become if you have the right software. You can sync your business bank account to easily pull transactions, capture and record all bills and invoices, prepare daily totals in seconds and much more. That being said, as a new business owner, you may not need to invest in one right away.
We recommend using an Excel sheet to sort your transactions at the very least – and as you grow, consult your accountant on the best software for your specific needs. Or look out for special deals – some banks provide incentives such as free bookkeeping software if you open a business account with them.
8. Outsource your bookkeeping
When you are just starting, it is okay to handle the business books on your own. As you scale your operations, however, more pressing needs will demand your attention. Small business bookkeeping, moreover, is a task that requires a high degree of expertise and up-to-date awareness of relevant laws – which, chances are, you do not have.
It is a far better use of your time and money to hire a bookkeeper who can handle the books faster and more accurately than you can. Plus, they will very likely be able to suggest ways to optimise your costs that you may have missed yourself, which is a bonus.
Over to you
So how to start bookkeeping for a small business, you ask? We recommend outsourcing to a bookkeeping services provider who can also handle other business functions for you (such as payroll) when the time comes – if you do not have the budget to build an accounting team in-house.
Bookkeeping may not be fun, but it is critical to ensuring your small business runs smoothly, and your costs are optimised. By following these tips and engaging a top-notch bookkeeper, you will soon be on your way to shipshape accounts and healthy business growth. If you are looking for help right now, talk to a Bradleys accountant today!