Small Business Bookkeeping - How to Tackle it
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Running a small business invariably entails bookkeeping. Even if it seems daunting or time-consuming, it is an essential aspect that cannot be ignored.
With the right tools and a slight adjustment in your approach, the task can be made more manageable.
In this guide, we delve into bookkeeping — what it entails and tips on how to make it easier for you. As an added bonus, you will get to know what software features to look out for in your journey towards digital bookkeeping.
Let’s get started.
Often mistaken or interchangeably used with ““accounting,”” the term ““bookkeeping”” denotes the process of recording your business’s monetary inflows and outflows. It includes collecting and storing financial information such as receipts, invoices, and bank statements.
Comparatively, accounting refers to interpreting that data and creating reports and forecasts to understand your business’s financial health and performance.
Both are important, but for small businesses, bookkeeping should be the initial focus. Establishing meticulous bookkeeping helps in compliance with the law and avoids the risk of fines. Additionally, it provides a stable foundation to draw reliable insights into your business finances.
Essential Bookkeeping Tasks
Despite various tasks falling under bookkeeping, the following are five essentials that should be routinely managed:
1. Accurate Record Keeping: Ensure that all incoming and outgoing transactions are properly noted down along with the amount.
2. Transaction Reconciliation: Check your bank statement against your financial records to spot errors like unexplained spending or charges, and double payments.
3. Cash Flow Monitoring: Regularly check available funds to manage payments to suppliers, invest in stock, or extend your credit if needed.
4. Manage Late Payments: To keep cash flowing, chase those customers who still have outstanding invoices.
5. Tax Payment: Pay your business taxes rightly and on time.
Tax is crucial for every business. It’s wise to comprehend the types of tax that apply to you and the procedures to submit your tax return to HMRC.
Making Bookkeeping Easier
You can streamline bookkeeping with three golden rules:
- Attend to tasks more frequently for smaller chunks of time.
- Digitize everything for accurate record keeping.
- Establish an efficient and timely invoicing process.
If you stick to these, you’ll not only slash the time spent on bookkeeping but also maintain healthy cash flow.
Choosing the Right Software
To avoid spending hours doing bookkeeping manually, consider using top-notch accounting software. When choosing software, focus on aspects like:
- digital record capture
- automatic reconciliation
- mobile functionality
- tax automation
- secure cloud storage.
A piece of software that provides all these can make the job smoother by automating many tasks and is often incredibly cost effective.
Neglecting legal issues can lead to significant risks. Make sure you have done proper due diligence before signing contracts and agreements. Keep an updated record of all your legal dealings, and consider investing in legal consultation.
One particularly relevant aspect for small businesses just starting with their bookkeeping is that they might need to register for VAT on their sales of goods and services. Missteps when dealing with VAT can lead to significant fines and potential legal problems.
Remember, successful businesses understand the importance of the legality of their transactions.
Achieve Streamlined Bookkeeping
Understanding the basics of bookkeeping can offer a clear perspective on your business’s financial health. Remember, little but regular effort saves you from headache later. Use the right bookkeeping solution to streamline your financial data, monitor your cash flow, and ensure compliance with tax laws.
Legality should never be overlooked. Note down your legal obligations and make necessary efforts to fulfill them. Regularly review your legal documentation to ensure compliance with your business.
Consider using Genie AI to use our AI Legal Assistant for Drafting, Reviewing, Negotiating, and Signing Legal agreements. Adopting digitization and automating your legal processes will not only save you valuable time but also reduce the risk of human errors significantly.