Profit—not keeping books—is the reason why you may have started your small business. Thus, it is unlikely that you have much knowledge about bookkeeping. You might think it’s all addition and subtraction of expenses from gross, but the truth is far from it.
The problem is that many small business owners in the London area tend to underestimate bookkeeping, leading to disastrous results in their accounts. Bookkeeping is something you need to take seriously if you want to become rich in your line of business.
Since you likely don’t have an accounting background, knowing these steps will help ease accounting tasks and ensure accounting success for a small business.
1. Separate your personal and business bank accounts
You own your capital and personal money, so it might come weird to you to establish separate bank accounts for each. There is a risk, however, of compulsive spending and jumbled finances if you don’t do the appropriate separation. Jumbled finances are the last thing you want to have, especially if tax season is around the corner.
Save yourself from this headache by keeping your personal and business bank accounts separate. Doing so would help enforce fiscal discipline and orderliness in your expenditures. You only withdraw from your business bank account only to pay for expenses related to your company, and personal expenses should only be taken from your personal bank account.
For an added level of fiscal responsibility, assign a fixed paycheck to yourself from your business bank account. A paycheck would serve as your paper trail that would document your disposable income from your business profits. For instance, you can set a fixed “salary” of 10% of your net income.
2. Make bookkeeping a habit
Procrastination will leave you facing a ton of papers and erroneous financial data that could affect tax calculations. You also won’t have a decent picture of the state of your business finances, preventing you from making wise and timely decisions.
Thus, you need to make bookkeeping a habit, better if daily. Daily bookkeeping would help prevent missed or duplicated transaction entries that could muddle your accounting efforts. You also stand to benefit in the long term because you will be sure that your financial reports stand on reliable, timely data. An accurate and timely financial assessment can, in turn, help guide you to make crucial business decisions.
3. Be meticulous and accurate in your paper trail
Cash flow mistakes such as overestimating the money you have can ruin your small business. By ensuring the accuracy and timeliness of your bookkeeping, you minimize the likelihood of encountering these cash flow problems. Record every single business transaction that you have daily. Create a logical filing system that would enable you to store and retrieve the data on transactions for future accounting use.
4. Monitor cash flow to stay above the red line
By doing your bookkeeping daily, you can make it easier to monitor cash flow. All you need to do is to add and subtract columns to check monthly expenditures and net profit. Make sure to reconcile your receipts and collectables with your financial records. Seeing how your finances fare daily would help prevent you from making expensive decisions. You can also see how much you are saving.
5. Plan ahead
Bookkeeping is more than records and calculations. It involves actively incorporating financial data to form trends that you can use to plan your finances. Amid the uncertainties stoked by Brexit, you can’t afford to be unprepared. Plan what happens after Brexit with the help of bookkeeping.
If you’re looking for a cheap Wimbledon accountant & bookkeeper in London, get in touch with us today for a free consultation!