The new tax year starts soon and although keeping your accounts in order may not be your favourite job, it needs to be done. So what can you do next year to make your job easier?
Here are my top tips to help with your bookkeeping:
- Use accounting software – unless you only have a handful of transactions a month, I would recommend investing in some kind of software. There are so many online options available, some of which are free (but these may have limited functionality) but otherwise costs start from around £10 per month. The time and stress saved by using an online package such as Xero or Freeagent will be well worth the money!
- Open a separate bank account for your business – although strictly only necessary for a limited company, having a bank account which you only use for your business will make your record keeping so much easier! For a sole trader, just open another account in your name and only use it for your business. Having business and personal transactions all mixed up together in one account will mean your accounts take much longer to sort out, and you may miss some transactions from your records. Missing costs from your accounts results in a higher tax bill.
- Transfer money out of your business account for personal use once a month – although it is not treated in your accounts as a salary – think of it like one. An employer does not pay you 2 or 3 times a week or “sub” you for your weekly shop, so don’t keep dipping into your business bank account to pay for small personal items.
- Keep a separate spreadsheet during the year of other costs that you incur partly for your business, but that are paid from a different bank account. This could be, for example, because you already have the DD set up there such as your mobile phone bill, internet costs or annual subscriptions, possibly even your Amazon purchases. I spend a lot of time asking clients what amounts paid to Amazon relate to, and whether they are for business and personal expenditure!
- Update your records regularly! Book out 30 minutes a week in your diary to send your invoices out, chase payments, reconcile your bank account in your online accounting package, or update your manual spreadsheet. It’s like many things – little and often pays off!!
Treat yourself to coffee and cake either while you do it, or once it’s done – and you never know you may start looking forward to your weekly accounts session!
For help with setting up an accounting system that works for you, contact Rosie Forsyth at Wilkins & Co.