The complete guide for small business bookkeeping.
Running a small business can be a stressful time. All the daily tasks and errands can be extremely overwhelming. In addition, many businesses struggle with the important task of bookkeeping.
With mountains of receipts and invoices, ever-expanding to-do lists as well as balancing the books each month, plenty of businesses have no idea where to start and what to do.
But what even is bookkeeping? Can I learn to do it myself? What should my business do to keep on top of the books?
This guide will help your business to make the start, giving you tips and advice on how to keep on top of bookkeeping. So, let’s get started.
What Is Bookkeeping?
Bookkeeping is the action of tracking all business financial transactions, starting from when the business was launched all the way to closure. Different businesses use various methods of accounting systems, but they all record supporting documentation of transactions.
These types of documentation include receipts, purchase orders, invoices and other types of financial records that provide evidence of the transaction taking place. This can be recorded using various methods such as spreadsheet programs, Microsoft Excel or even by hand.
What Duties Do Bookkeepers Have?
Bookkeepers have lots of tasks and responsibilities that are important to the financial side of a business. They are constantly updated with new information to process, always keeping busy. Below are some of the things that bookkeepers do.
Monitoring cash flow
Possibly the most important task that a bookkeeper has is to ensure that the business keeps a constant cash flow and doesn’t run out of day-to-day money. To do this, bookkeepers have a keen eye on the balance between revenues to expenses.
Sending invoices
Bookkeepers will prepare invoices for a business, then they will be sent to clients. Other tasks such as chasing up late payments will also be done by the bookkeeper, ensuring all owed funds are recovered.
Keeping an eye on daily transactions
Every day there will be bank transactions for a business. Sometimes, bookkeepers use accounting software that can automatically detect bank feeds. This creates an easier view of transactions, resulting in better cash flow management and less time spent on data entry.
Preparing the books
Another responsibility is to make sure all the accounts are up to date and valid for when the account requires them. This way, accountants are given the most accurate data to offer business recommendations and complete other important business tasks.
Handling the accounts payable ledger
On behalf of the business, bookkeepers will sometimes make payments too. This could be the payment of expenses, supplier invoices and others.
How Do I Keep On Top Of Bookkeeping?
Bookkeeping can be extremely overwhelming and stressful. With numbers and invoices flying everywhere, it is common for it to be dreaded by many business owners. However, with our tips, it doesn’t have to be that way, Let’s take a look at some tips.
| Filing and invoicing advice | A quick tip is to separate your sales and purchase invoices. It is recommended to raise and file your sales invoices in sequential order. When filing purchases, there are different methods. Simply keeping your filing system logical is the best way to go. |
| Utilise software | The software has been a huge benefit for many businesses. With the latest government scheme ‘Making Tax Digital’ it can become easier than ever to store stacks of papers and receipts. Some apps allow you to track all your incomings and outgoings as well as keep everything organised. |
| Ensure you are up to date | It takes time to monitor and keep your books up to date. However, with a routine of regular record checking, you can keep on top of this a be more organised. This reduces the risk of paperwork getting lost. Another tip is to raise sales invoices as soon as you get them, increasing the chance of remembering information. |
| Control your credit | By managing your debtors effectively, you can improve your cash flow. Make sure to limit the amount of late or slow-paying customers as they can damage your business. |
| Keep everything | You must stress to your employees how important it is to keep hold of all information. Staff should be advised to keep receipts and invoices for all expenditures. On claims, employees can include copies of their receipts. All records should be kept for at least 6 years. You never know when they’ll be needed, so don’t have the risk of regretting disposing of information at some point. |
| Even petty cash receipts have importance | Whenever you use petty cash, it needs to be recorded. Petty cash accounts should be reconciled often, spotting any discrepancies and spotting where money is lost, reducing theft. |
| Hire a professional bookkeeper | Don’t let pride get in the way. Bookkeepers are experts in this field, with plenty of experience and knowledge. By giving them the responsibility, you are allowing yourself more time to spend on important tasks, freeing up time to work on your business. Plus, you’ll reduce the risk of mistakes. |
| Personal and business finances must be kept separate | There should be clear boundaries between your personal finances and your business finances. Intertwining the two can be extremely messy and lead to complications. You should be looking to get two separate accounts as soon as possible. |
| Get the basics covered | Yes, reaching out to a professional is recommended. But still, you should begin to learn the basics of how to bookkeep. This little bit of knowledge can go a long way, as if an accountant or bookkeeper asks for account information, you have a better idea of what is going on. |
| Plan ahead | No one wants to receive a penalty from HMRC. With so many different types of tax to keep on top of, a plan is essential. This can be simply putting some funds away in a savings account, so that if you come into some trouble with HMRC, money is ready to avoid stress and panic. |
| Cheque and cash payments | If customers pay by cheques and cash, you’ll want to be daily banking to reduce the risk of money getting lost. The quicker you get these payments into the bank, the safer and better it is for your business. |
How Can A Bookkeeper Help My Business?
For small businesses, a bookkeeper might be a valuable investment, if you can afford it. After your company is established enough, this makes sense. Here are some reasons for this:
- Reduces accounting bills – If you use an accountant to monitor daily transactions, you could save your business money by hiring a bookkeeper.
- Cash flow monitoring – To avoid every businesses nightmare, cash flow troubles, a bookkeeper can keep on top of this.
- Frees up your time – By letting someone else do this task, you are free to concentrate on other areas of your business, saving time and money.
- Smoother business – If you take away proper bookkeeping, your accounts will not be accurate, leading to accountants not getting the full picture, ending in poor strategic business decisions.
Can I Teach Myself Bookkeeping?
Yes, you can teach yourself bookkeeping. You’ll want to find a reputable course that is trusted and well recognised. There are plenty of online courses that can teach you how to bookkeep, giving you a basic understanding of accounting too.
To learn this skill, you don’t need a degree, with some bookkeepers only having high school qualifications. However, it is recommended to have a bookkeeping qualification to better understand the industry and give you a better chance to get a job.
How Can I Learn Bookkeeping For Free?
With many resources online, there has never been a better time to learn bookkeeping. Even better, there are many free tools to get you started. Below are some of the recommended tools by Beginner Bookkeeping.
Harold Averkamp (CPA, MBA) runs Accounting Coach. This tool will begin at the basic level, all the way towards managerial accounting. On this site, you can find plenty of information, with a search bar to ask any specific questions you have.
The 2o module free online course is called Bookkeeping Training. Here, you can use flashcards, cheat sheets, visual tutorials and progress tracking for a set price. Meanwhile, you can find tonnes of free information to get you started.
Sam Morton has written accounting and bookkeeping courses for you to learn and prosper. With YouTube videos and training videos, you can learn about topics such as:
- Payroll Basics
- Excel Basics
- Credit Control
- Software like Sage Accounts and more.
To get you up and running, Larry Kim on INC.com has given you 11 QuickBooks resources for free. If you don’t know how to use it, this is for you.
If you have paid for bookkeeping software, try searching online for tutorials and training videos for free. This will give you a better understanding of how to use it, helping you to master the skills.
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