There are many reasons to keep watch on your books. Knowing your income, your outgoings, and having control over your finances helps your business and personal life. When you have a complete handle on all of your finances you will actually feel safer and more comfortable with your life. If you are not a numbers person or the idea of keeping track of your finances terrifies you, then you need to hire a bookkeeper to manage it for you.
Actually Do It The first and most important bookkeeping tip is to actually do it. If you can’t or won’t do it, then you will need to hire someone. Keeping your books is a legal requirement. If you have them you will be spared fines.
You will have more control of your business when you know your finances are well accounted for through bookkeeping. Without a system in place, such as bookkeeping, it is near to impossible whether you are earning or losing, what bills need to be settled, to whom you are indebted or who owes you back. Keeping your own books will lower the fees your accountant charges you to manage your accounts. And if you ever want to sell your business or get financing, you will need to present your books.
Track it All Start by tracking all of your expenses. Doing this may end you up paying for things that you don’t know about or building up fees that you are blissfully unaware of. Tracking your expenses is the first and most important way to keep track of your finances. Start by noting down everything you buy, ever! If you purchase a coffee, keep the receipt and track it. You need to know how much you pay for coffee every week, month, and year. The coffee is just one example; you must track all of your expenses from petrol money to house bills.
Set Aside Money For Taxes Every time you get paid you should put aside the right amount for taxes. You don’t want tax time to come around just to find out you have spent the money. The IRS can incur penalties for you not filing out your tax returns on time, and you could find the situation getting worse. Take note of the tax deadlines on your calendar to keep you updated on your tax dues. It is smarter if you set aside money throughout the year so you are always prepared.
Use A System to track it A system can be as simple as a diary or file that contains all your incomings, outgoings, taxes, and all other finances. You can also get a system like Simplex to help track your books and accounts in a simple fashion. There are other systems like Everite and Collins that you can use or outsource to manage your accounts and keep your books. There is a wide variety of computerized systems, and if you are running a small to large business you will want to consider using one of these systems. You can use Sage, MYOB, or search in Google for bookkeeping systems. There are many bookkeeping apps to choose from. The bottom line is that you must use a system. You can use a notebook or filing system to keep track of everything, and organize it so that you can see incomings and outgoings.
Simple Rules For Keeping Books When you are writing in your files, make sure to use a pen instead of a pencil. If the IRS or the tax office should inspect you, they like to see that you are using a pen. Figures written with a pencil may appear suspicious because these can easily be erased. Never use correction fluid as the checker of your book may think that the data are doubtful.
Keep your books updated. If you wait around for months before organizing and managing your books then it will get too overwhelming, and you will end up messing up or leaving it too long. Make the updates daily or at the very least, weekly. This will save you from piled up work and help you to have these books manageable at all times. When you are paid, or you spend or any financial transaction takes place, it should be recorded in your books. If money is going in or out of your pocket then it needs to be in the book. If you use online banking then print out your bank statements whenever you get them. If you get bank statements in the post then keep them all filed so you have all the information needed whenever you are organizing or sorting out your books.
More About Your Bank Statements Every month you should go through all your bank statements and confirm that they fit with the details in your books. Anything that you have missed or that isn’t covered you need to track it properly in your books. Go through each entry, and as you match the entries from your books and your statements you should tick them off. This is an easy way to make sure everything is kept up to date. When you go through the statements make sure you notice any standing orders, interests or charges, and confirm that they are all in your books properly documented. When you have gone through everything, calculate the final balance and write it down so you have it recorded for that month. Compile all your total sales figures and expenses for every month, and when you have all the data you will be able to properly calculate your profit and loss. You should record all of this in a spreadsheet or notebook at the very least. There are many softwares and services that you can use to make this much easier.
A Friendly Reminder If this sounds a little overwhelming, you know exactly why there are bookkeepers. Hiring a professional, someone who knows how to do bookkeeping and master it especially when dealing with numbers and figures, will give you an ample peace of mind. Bookkeepers can manage several accounts so you won’t need someone full time, and you can usually get the service of someone for a fairly low fee to manage everything for you. Regardless of whether you hire a bookkeeper, you will still need to track your income and expenses by saving receipts, invoices, bank statements, and any other financial transactions.
Claim Business Expenses This is extremely important if you are not doing it already. You can claim for any cost that is made exclusively for the business. You should save all of your receipts, especially those for the business because when you add up those costs you can claim for these. If you have stationary that you use in the office you can claim for that. If you take a trip to the bank in order to have a business meeting then you can claim for the cost of petrol. If you have an office at home you can claim a portion back from your electricity and maintenance bills including telephone and Internet. If you are having trouble deciding whether something is exclusively being used for the business then you can talk to an accountant.
Get some further training The HMRC gives away some free training including some workshops, which you can go on to learn more about this. You can go to a free workshop to learn about setting up a company, managing your VAT, running a payroll, and many other financial lessons. It’s important to take an interest in learning how to manage your finances because if you can get on top of it your business will grow and your finances will improve. You will also gain incredible peace of mind knowing that you are on top of everything yourself and you don’t need to hire someone, although you still can if you want.
Conclusion There is a lot to think about when dealing with your taxes, books, and finances. This is why you may want to consider hiring an accountant or bookkeeper to start the process of managing your books and keep your finances in check. It’s a legal requirement, and it gives you an opportunity to have complete control over your financial life. You can start anytime you want but the best time is now.