Running a business is an energising and creative endeavour, but like anything else it has its duller routines that feel like chores.
Bookkeeping can fall into the latter category. It’s something that has to be done, but may feel like it’s contradictory to the reasons for originally going into business.
Make it Simple
Contrary to popular belief, you don’t need an expensive suite of accounting software or a degree in finance to run adequate books. At its basic level, all you’re doing is balancing incomings with outgoings, and saving the documentary evidence to back up your statements.
You can work effective bookkeeping systems from a written ledger or an Excel spreadsheet – with Excel having the advantage of automating the arithmetic.
As long as you’re tracking what you spent, what you earned and providing some kind of explanation for why or how each transaction happened, you’re covering your bases.
Don’t shy away from seeking professional help if you know accounting will always be something you struggle with. You can hire a bookkeeper for a couple of hours a week to keep records up-to-date. They’ll also set up a system that’s accountant-ready, so you’ll save money on the end-of-year accounting bill too.
Run a Separate Business Bank Account
While it may be tempting to run business finances from your personal bank account, it’s not recommended for a couple of reasons:
- You’ll be giving professional helpers access to your personal finances.
- It makes identifying business transactions harder when they’re mixed with personal spending.
Opening a bank account for business isn’t hard. You won’t need a business plan or income proofs unless you want to borrow money, and most banks offer a grace period of a year or more during which you won’t pay bank charges.
Stay Up to Date
Little and often is the watchword for doing your own books when you have a million other things to do. Letting transactions and entries mount up makes it progressively harder to delve in and get started.
Make it easier by:
- Organising your desk so you have a dedicated place for receipts or invoices you need to enter into your books. Seeing the paper mount up will encourage you to clear the decks.
- Having a filing system. You could use ring binders or box folders. Plastic document wallets can hold receipts for the month, and if you staple each one to an A4 sheet of paper in date order, it keeps them permanently organised. Start a new sheet whenever you need to, then file them all in a separate plastic wallet for each month.
- If you use a spreadsheet, keep Excel open on your computer. Dedicate a few minutes in the morning and afternoon to updating your records, rather than leaving it all to the end of the week. Tell yourself you’ll focus on the books for five minutes, and set a timer. When the timer goes off, you’ll be settled into the task and be willing to do another five.
With up-to-date books, your enterprise has more chance of success. You’ll be able to sidestep financial pitfalls, see ways to trim expense and maximise profit, and keep your tax bill as low as possible. It takes a little effort, but it’s worth it in the end.