Over the past 20+ years we've seen a wide variety of bookkeeping systems and methods for all sorts of business sectors and we know some of the common pitfalls that are out there so here are some handy tips to help you keep your finances in shape if you do your own bookkeeping.
Many people stress over the mounting invoices and receipts when they are not organised and it can lead to a daunting task to sort out so it gets put aside for another day. Don't throw everything in one file or box to sort out later, instead separate paperwork in to easy to manage files or folders that are clearly labelled. These can include files for supplier invoices, debit/credit card receipts, cash payments, etc. By doing this you will also be able to find things easier and keep your accountant happier at the end of the year.
Invoices and receipts are vital for documenting your business expenses, particularly when claiming any VAT you have paid. If HMRC ever inspect your records, the will check that you have a valid VAT invoice to support your claim. Without it they will simply disallow it and want it back, with the added possibility of penalties if they believe you have acted carelessly or fraudulently.
In recent years there has been a burst of technology for all sorts of things and bookkeeping is no different. There are many software packages available to help move you away from paper records or spreadsheets, particularly cloud based. For keeping receipts there are smart phone apps that allow you to scan or photograph them, some of which even capture the date for you and integrate with accounting software. Online cloud storage is also widely available to keep things more accessible.
You should set aside a suitable amount of time on a regular basis to avoid last minute panic when deadlines arrive. You'll find that if you do a little at a time it is far more manageable, plus you can see how things are shaping up as you go along.
Don't run the risk of losing all your hard work in case of computer breakdown, fire/water damage or just simply deleting something my mistake. Imagine if you lose an entire years worth of work and have to start from scratch for the sake of keeping a second (or even third) copy elsewhere!. Signing up for a cheap cloud service means you can keep copies of electronic files safely stored online just in case.
Business expenses should ideally only be paid via business funds. Having payments from personal accounts means you have to identify and record these separately which is obviously more work that could be avoided.
For most businesses, the business bank account is the primary source of transactions so you should take care to ensure that everything is recorded. To do this you should prepare a very simple reconciliation as part of your records (i.e. opening balance + money in - money out = closing balance). By doing this you are making sure that every expense is captured for you to get tax relief.
Understanding the basics of VAT and how it might affect your business transactions is an important part of being compliant. Whilst there are many different areas of VAT law, speak to your accountant about the types on transactions you have so that they can advise you on any potential problem areas. Or you can check HMRC's main guide as a starting point if you want to look for yourself at https://www.gov.uk/guidance/vat-guide-notice-700. Examples of common pitfalls include late registration, entertainment expenses, car leasing, private fuel and land and property.
Letting customer accounts spiral out of control obviously affects your business cash flow. By having procedures in place you can minimise the number of payment days. If you use accounting software, see if it has the facility to offer integrated card payment services. Some software even does some of the chasing automatically for you too!
Unless absolutely essential, you should keep your records as easy to read and understand as possible. For example, when you analyse out expenses to columns on a spreadsheet or account codes on software, there is no need for a multitude of different categories. Try to keep them more or less in line with how your accountants have prepared last year's accounts.