The way businesses keep their records has changed significantly over the past 5 years. Part of this has been forced change with the introduction of Making Tax Digital (MTD) for VAT and the rest has been influenced by huge technological advances by software companies.
In our opinion, MTD has just forced the inevitable change to come about more quickly, as all of the businesses we work with see the advantages of implementing cloud software, including saving time and having access to up-to-date data.
Here are a few best practices to help you manage your small business accounting:
- Get a separate business bank account and use this solely for business transactions. This naturally allows you to keep track of all your business income and expenditure, even if you do nothing else!
- Steer clear of cash. Recording cash transactions in your accounting system is extremely time-consuming (especially if your system is just paper records) and you will undoubtedly miss things. Pay for everything on your card and receive money directly into your bank account to ease your accounting headaches.
- Keep on top of it. Putting it off only increases your work and gives you more to think about. Use Xero to link directly to your bank account and pull through the bank transactions daily – you can then process them daily. Download Receipt Bank to take photos of your receipts and invoices as and when you receive them. You can then chuck the paperwork in the bin as Receipt Bank will upload it all to Xero automatically – simple!
- Be proactive about finding out how much tax you need to pay. Whether this is income tax, corporation tax, VAT or PAYE, they can all be significant sums that need to be planned for. Often, this can be planned a lot further in advance than most businesses think.
- Understand the cash flow pattern your business has and the underlying performance that is affecting your cash flow. Accounting software can help you look at your past performance and understand your business at a deeper level.
- Consider using a professional to help keep things running smoothly. Even if this isn’t getting someone to do the bookkeeping for you, you should still lean on your accountant to help you make the software work as efficiently and easily as possible for you.
- Finally, there are so many apps now available to help you run your business, from Receipt Bank to manage your invoices, Stripe and Gocardless to take payments from customers and Dear Inventory to manage inventory. Here, you can have a look at the apps that could help you manage your business.