Bookkeeping tips for entrepreneurs

Being a business owner is an exciting venture, but it comes with many challenges and obstacles. To avoid financial pitfalls and give yourself the best chance of success, you must master bookkeeping.

As an entrepreneur, good bookkeeping is essential to maintain an accurate view of your company finances. It enables you to manage your cash flow, set budgets, plan your tax returns, make more accurate business decisions and plan ahead for growth.

Granted, managing financial records is not the most intriguing aspect of running your own business. However, mastering good bookkeeping will ultimately save you time, hassle and money - and help you reach your business goals faster.

Read on for Walji's bookkeeping tips for entrepreneurs. If you are struggling with any aspect of managing your finances, we can help. To apply for a consultation, please fill in our contact form and our specialist accountants for entrepreneurs will be in touch.

What are the basics of bookkeeping?

At its most basic level, bookkeeping is the practice of keeping track of a businesses' financial transactions, i.e. how much money goes in and how much money goes out.

This includes:

• Income - e.g. from sales revenue, investments, sale of assets, interest, rent
• Outgoings - e.g. expenses, buying stock, rent, overheads, salaries, bank charges, marketing costs

The days of pen and paper are gone and at the very least, this should be recorded in a spreadsheet.

However, it is best to use specialist accounts software, as this will give you greater control and help you meet your obligations under Making Tax Digital.

Our top 5 bookkeeping tips for entrepreneurs

Stay on track with your entrepreneurial finances with our tips.

#1 Set up a business bank account

For the sake of simplicity, it is good practice to keep your business finances and personal finances separate.

This is as simple as setting up a separate bank account and using a business credit card for every financial transaction. This in itself is a basic accounting system.

Even if you lose track of your transactions, they will be much easier to find if they are all on one business account statement, rather than trawling through your personal finances.

#2 Be disciplined about recording business expenses

You should make it a habit to keep an up-to-date record of all your business expenses, i.e. purchases that are made specifically for the business.

It's important to capture every single one of your expenses, or you will miss out on tax deductions.

If you stay on top of recording your expenses, you will thank yourself when tax time rolls around, as you won't need to track down receipts or trawl through bank statements to find what you've spent.

Also, you may be required to show evidence of legitimate business expenses to HMRC, so it pays to have an accurate record.

Paper copies of transactions are still an acceptable way of record keeping, however, in light of digitising of the tax process, we would highly recommend keeping your records stored digitally.

If you ever receive a paper invoice or receipt you can take a photo of it on your phone and send it to your Dropbox for quick and easy storage. This will result in fewer headaches from having to keep the paper version and remembering where you put it!

#3 Find the right accounting software for entrepreneurs

Using specialist accounting software instead of a spreadsheet to keep track of all your business expenses and income can make life much easier.

Cloud accounting software allows you to access your finances wherever you are, on any device, so it's much easier to stay on top of bookkeeping.

There is an abundance of accounting software out there, such as Xero and Quickbooks. It's worth doing a bit of research to determine which is best for your needs.

Just make sure your chosen software complies with Making Tax Digital. If you're unsure, then consult a professional accountant, such as Walji.

#4 Produce financial statements

If you use accounting software and adopt a robust bookkeeping process, then it is easier to produce financial statements such as balance sheet and profit/loss report.

These types of reports will provide valuable insight to help you run your business more effectively.

For example, accounting software has add-ons such as cash flow reporting, which can help you to keep on top of payment deadlines.

#5 Be disciplined with your bookkeeping

Entrepreneurs are naturally driven people who throw all of their time into making their business a success.

We understand that's all too easy to avoid time-consuming tasks like bookkeeping and we come across a lot of entrepreneurs that put it off for as long as possible.

It's not uncommon for some to wait until the entire year has finished before they open up the shoebox of invoices and receipts! This is a surefire way to make the financial year end very stressful and confusing.

A little and often approach is far more beneficial. We recommend spending a little bit of time on bookkeeping every couple of weeks, or every month to benefit you in the long run.

Not only will your tax returns become a lot easier, you will you be more financially aware of how your business is performing, which will help you make better decisions on spending.

FAQs

What is the difference between an accountant and a bookkeeper?

All accountants can be bookkeepers but not all bookkeepers are accountants! A bookkeeper can adequately record and organise financial transactions, but has no formal accountancy training.

An accounting firm, such as Walji, can manage your bookkeeping as well as providing financial analysis, business support, tax and VAT services, payroll and much more.

What can a bookkeeper do for my business?

Getting organised and staying on top of your bookkeeping can be a timely and complex ordeal. For some entrepreneurs, the time and effort it takes to stay on top of bookkeeping can really hinder businesses growth.

Using the services of an experienced bookkeeper can save you a lot of time and money so that you can dedicate more effort towards your running your business.

In addition, a bookkeeper will keep you in line with tax laws to avoid costly penalties and protect the financial health of your business.

There is very little input and effort required on your part - it can be as simple as taking a picture of financial records, such as invoices, and emailing it to your bookkeeper for them to deal with.

Contact Walji for bookkeeping advice and services

Hopefully, these bookkeeping tips will inspire you to become as good a bookkeeper as you are an entrepreneur.

If you require help with bookkeeping or any other aspect of your accounts, then Walji can help.

We are a professional, experienced team of chartered accountants that help businesses and entrepreneurs keep more of what they earn. We also offer valuable business consultancy services to help get your venture off the ground and keep it growing.

Please fill in our contact form to get in touch!