Paperwork isn’t the most exciting part of running a small business, and spending valuable time balancing payments or issuing invoices is no-one’s idea of fun. However, as every small business owner will know, it’s a necessary evil, and something you have no choice but to stay on top of if you want your company to be a success.
Being in control of your bookkeeping will also help you to maintain a healthy cash flow and keep an eye on the trends in your finances; allowing you to spot problems early on.
Here, Opus Energy, renewable energy provider to small businesses, has shared its top tips to help you keep your business finances in shape.
Review your banking
The first step is to look at the service you’re getting from your bank and evaluate whether or not you’re getting the best possible deal for the type of business you are.
Reviewing the benefits of your bank now will mean you’re ready when the time comes for you to ask for extra services, such as loans or insurance. Ask yourself – would another bank give you the services you need at a better price? Are you currently being charged for services you could do without?
Check bank statements
It’s useful to get in the habit of checking your bank statements every month. This will allow you to gain a better understanding of the ins and outs of your finances, as well as helping to prevent the risk of fraud or banking errors, however, if that happens you can always rely on fraud lawyers to handle your case.
The most successful businesses spend their money wisely and have formidable credit control. Make sure you’re one of them.
Collect receipts for everything
It isn’t uncommon for small businesses to be part of a VAT or tax investigation, and they’re not usually anything to worry about, just as long as you have all the necessary paperwork and a sound financial advisor. Get in the habit of keeping a hard record of every transaction. It’s easier to collect them now than to try to go back and find them months, or even years, down the line.
Keep your accounts clean – separate business and personal expenses
Try not to confuse business accounts by using the company’s money on personal expenses. Even if you own the entire business, as a director it is not advisable to spend the money made by the business on your own purchases. Make sure you’re tracking separate costs reliably, so you can easily see how each cost has been paid for.
Set up a separate bank account and do your best to keep your accounts clean.
Do your bookkeeping regularly
Set time aside each week to do your bookkeeping. As simple as this may sound, it’s one of the most important jobs you can do to ensure the success of your business.
Although it might be tempting when you’re just starting out to cram your bookkeeping into the evenings or weekends, you’re more liable to make mistakes when you’re tired or rushing. Try to schedule in a regular slot where you can give your accounts your full attention.
Get help with your finances
If you find that your accounting needs are too great for just you, then consider hiring an accountant. A proactive accountant can save you more money than they cost to hire and can even help you substantially increase your profits.
It’s always a good idea to ask local business owners for recommendations when it comes to accountants, or alternatively the Institute of Certified Bookkeepers has thousands of qualified bookkeepers on its books and can put you in touch with someone local.
Your accountant will advise about what your business specifically needs. But generally, you should maintain three individual sets of records. These are:
Cash book: This should document all payments into and out of your bank account. In the future, this will become useful as a forecasting tool as well as a historical record of your transactions.
Purchase invoice file: Get in the habit of making notes on invoices giving information on when and how you paid them, whether by cheque, cash or other. Putting them into a chronological order will make yours (and your accountant’s) life a lot easier.
Sales invoice file: Keep a record of all of these invoices, and just as with the above, keep them in a chronological order. Keep those which haven’t yet been paid at the front of your file to help you credit control.
Uploading invoices to the cloud will ensure they’re backed up, so there’s no chance of you losing them.
Balancing your books doesn’t have to be a chore. All you need is a reliable and consistent system in place, and some basic financial know-how. For bigger companies, it may be a good investment to hire an accountant who can take on this responsibility for you and leave more time for you to focus on the important job of making your business as effective and profitable as possible.
Thrive, don’t just survive
With new statistics in the media almost every week detailing SMEs struggling with finances, or battling Brexit uncertainty or even late payments, it’s easy to assume that your business finances are in the hands of the current climate, or luck. But it doesn’t need to be that way. Banking is not easy, but by following these steps, you can ensure that your business doesn’t just survive, but thrives.