Most small business owners know that it is a legal requirement to retain financial records for six years, but staying on top of your finances will keep you up-to-date with your cash flow – the most vital financial statement for any small business owner.
3 simple bookkeeping tips for the small business owner
1. Be aware of the basic set of accounts - a cash book to record money entering and leaving the business; a sales ledger, detailing money received and amounts still owed; a purchase ledger to track outgoings; and a wages book, which details salary payments and National Insurance contributions.
2. Once aware of the basics employ a suitably qualified bookkeeper or accountant to keep your records for you - especially if you don't feel confident enough to tackle it yourself. A good bookkeeper or accountant can ensure you keep the right records, stay on top of your finances and free you up to get on with establishing and growing your business. They can also help you avoid potentially expensive mistakes!
3. If you decide to do the bookkeeping yourself – invest time in researching the cloud accounting options available to you, quite often they come with excellent support as well. Budget around £100 – 200 (+vat) per annum for a quality bookkeeping software package. Once invested, take the time to attend the training courses to get the best out of the system. Make friends with an accountant or appropriately qualified bookkeeper who can help you out when you get stuck on how to process a transaction or whether you can claim input VAT on an expense etc.
Whichever option you decide, whether outsourcing your bookkeeping or doing it yourself, ensure that you spend the time to understand the basics of bookkeeping. It is critical that you understand the numbers behind your business and having to do this in your spare time goes with the territory of the self-employed, but it is essential if your business is to survive and prosper.
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