Get started in small business book keeping

Get started in small business book keeping

EntrepreneurshipFounder Resource

Key takeaways (read the original full post here) :

  • Bookkeeping = recording and reporting financial information

  • Accounting = analysing the financial information and creating a financial strategy

  • Bookkeeping tracks payments in and out of the business using 3 financial records:
    • Cashbook – records your cash flow (all money moving in and out of your business’s account)
    • Sales invoice – records what you’ve sold, including both paid and unpaid invoices.
    • Purchase invoice – records what you’ve bought (including services) and how you’ve paid for each purchase.  

  • Bookkeeping is managing the day-to-day finances of a business. It includes:
    • Making payments (e.g. bills)
    • Chasing payments from clients and customers
    • Ensuring your business pays the right amount of tax
    • Claiming back tax for your business (e.g. expenses)
    • Managing payroll to pay your staff and HMRC  

Book keeping tips

  • Keep records of every payment so you can easily find them if you need to refer to them later.

  • Choose an accounting method – Traditional or Cash. Traditional accounting records income and expenses at the date of the invoice. Cash accounting records them on the date when you actually receive or pay the money.

  • Be strict with deadlines – never pay HMRC late. Keep on top of your outstanding invoices and chase late payers.

  • Keep track of expenses – in order to claim back tax on your business expenses you’ll need your receipts. File them in different categories to help you later. 
  • File bank statements and invoices in order – All bank statements and invoices (purchase and sales) should be filed in date order. For purchase invoices (i.e. money that you owe), keep separate files for paid and unpaid invoices, and file both alphabetically by supplier name. Always remember to move invoices over once you’ve paid them. For sales invoices (i.e. money owed to you), number them sequentially in order of when they should be paid, so that you can chase them effectively.

  • Choose suitable software – Excel might be sufficient for your needs or you may want specialised software.

  • Produce monthly reports – Creating a monthly report helps you stay on top of your business finances. These reports should include a profit-and-loss statement and the balance sheet, as a minimum. 

  • Know when to outsource your bookkeeping – At the start of your business you might choose to do the bookkeeping but as your business grows a professional bookkeeper might be a better option.

  • Bookkeeper or accountant? If you outsource your accounting function, book keeping and payroll can usually be included as part of the service.

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