Sadly there are always parts of running a business that aren’t quite as enjoyable as others, and for a lot of people the task at the top of that list is bookkeeping. It might not be your favourite way to spend a couple of hours, but good financial records are so important to creating a successful business. Here are 4 common mistakes a lot of business owners make, and how to avoid them.
We’ve all been there, we know we need to do an important task, but we’ve also got a list of lots of other important tasks too, and so we push the ones we don’t enjoy as much further and further down the list. The next thing you know, you haven’t looked at your accounts for 6 months and your finances feel out of control.
Dedicating a small amount of time each week to your accounts, even just half an hour, means that you’ll be up-to-date and feel more in touch with how your business is performing. Even if you outsource your bookkeeping, spending a little bit of time each week getting your receipts in order will help your bookkeeper to support you more and will also reduce the number of questions they have. Being on top of your accounts means that you’ll be able to identify problems (e.g. persistent late payers) or opportunities (e.g. enough spare cash to take advantage of the newly vacant shop down the High Street) as early as possible.
When you first start out it might seem like a great idea to use your existing personal account for your business too. If you’re a sole trader you don’t need a separate bank account, but not having one can cause lots of problems. Keeping your personal and business finances separate makes it much easier to keep track of your business expenses, which will be invaluable when it comes to completing your tax return. It also makes identifying any missing receipts much quicker. And while we’re on the subject of bank accounts, make sure that you regularly check your accounting records (whether spreadsheet or dedicated software) against your bank statements.
As well as telling you exactly where you’re spending money, keeping good records of your receipts also means that you’ll be able to claim what you’re entitled to when it comes to VAT or your tax return. You don’t need to keep the paper receipts themselves though, electronic copies are fine. There are plenty of apps out there that will help you with this, for example I love ReceiptBank for this (take a picture of a receipt and have it sent automatically to Xero…yes please!), but what you use isn’t really important as long as you’re consistent.
I go on about this a lot, but your business being profitable does not necessarily mean that you have money in the bank to cover your outgoings. Having a good grasp of your income and outgoings is really important when it comes to running a successful business. It’s no use looking at your bank balance today and using this to make decisions if tomorrow you have double the amount due to go out to suppliers. Not sure how to manage this? You need a cash flow forecast and, luckily for you, I have just the blog post!
If you’d like to know how outsourcing your bookkeeping can help your business I’d love to meet you, so why not schedule a free no-obligation consultation with me.