Small businesses are the backbone of Britain, but they’ve also been disproportionately affected by the COVID-19 crisis. The thing is, business owners are already so busy running their affairs that paperwork is an activity that is often relegated to the evenings and weekends.
What might surprise many business owners, however, is that these administrative tasks could be the source of critical savings and it literally pays to know about the tricks of the trade. By following just a few simple steps, it’s possible to cut the slack from your business finances and you could even make the process a little easier along the way. Keep reading to learn more about some of the best accounting tips for small businesses.
Keep accurate accounts
Starting off easy, it just makes sense to keep your accounts neat and accurate. Of course there are plenty of entrepreneurs who work best on a cluttered desk and who thrive on the chaos of the commercial world, but there’s no room for error when it comes to accounts.
By keeping your receipts filed and your cash flow recorded, you could make your bookkeeping easier to handle. Beyond this, failing to keep your financial house in order could lead to mistakes when it comes time to file your tax return – and nobody wants to be explaining why their figures don’t add up to HMRC.
Make use of accounting software
When you run a small business or work as a sole trader, keeping your own accounts can often seem like the simplest thing to do. It’s cheaper, after all, and doing so gives you full oversight of your financial status.
Despite the simplicity of doing your own books, you could be missing a trick by ignoring all of the accounting software that’s available to you. In today’s digital age, technology should be front and centre of your bookkeeping strategy and in many cases it could make it easier to track your income, outgoings and tax liability. Perhaps the best thing about most accounting software packages is that they’re easy to use, making them ideal for the less tech-savvy business owners who simply want to get on with what they do best.
Get a more effective payment solution
No matter how you take payment for your goods and services, keeping track of the money you bring in is nine-tenths of business accounting. Unfortunately, when you’re dealing with cash, card, cheques, and BACs, it’s easy to lose track of the figures.
One thing businesses can do to lighten their load is to invest in a more efficient payment solution, such as faster processing. Provided by merchant services provider UTP, faster processing is a same day funding solution that allows businesses to not only receive the money from transactions faster but also inconvenient batches that are easier to track. It’s much easier to keep your books up together when all of your income is coming in on time, every time And if you have an in-store payment solution, make sure you have enough card machine paper for your customers.
Keep your business and personal finances separate
It’s a no-brainer, but you’d be surprised by just how many small business owners feel it’s easier to keep their business and personal money together. The problem with this, however, is that it quickly becomes impossible to track your business and personal income and outgoings. This can very easily turn into a tax nightmare, and the last thing you want to do is search through all of your statements and receipts to find a single business transaction.
Opening a separate business account is perhaps the easiest thing you can do, but there are alternatives. If you’re a sole trader, it’s worth looking into whether your bank offers simple online savings accounts that could act as a holding account for your business finances. Unless you enjoy untangling transactions when the tax deadline rolls around, keep your money separate and benefit from simpler accounting.
Know your options
The COVID-19 pandemic has caused far too many businesses to close their doors and pull down the shutters, many for the last time. Nobody wants to have to call time on their business, and the government have recognised just how important small businesses are to the UK economy.
It only makes sense for business owners to educate themselves about the potential grants and loans available to them, and a little state support could be an additional line of defence between your business and bankruptcy. For more information about the coronavirus business support available, visit the government website here.
Keep an eye on your cash flow
Above all else, remember to keep tabs on your business cash flow. Every business decision should have its foundations in solid accounting data, and failing to monitor your income and outgoings could leave your business at risk of insolvency or even liquidation.
With an accurate picture of your cash flow, you’ll know exactly how much money your business has available. This will leave you in a better position in terms of decision making and will allow you to make the operational changes needed to drive the growth of your venture.
Staying on top of the numbers
Owning a small business can be tough, but finances and accounting don’t need to cause you any additional difficulties. The tips we’ve set out above aren’t complex and don’t require much to implement, so why not try them and see how your business could benefit.