Top 10 Bookkeeping Tips for Small Businesses in the UK

Maintaining accurate financial records is crucial for any business, whether you're a sole trader, small or large company.

Why is it crucial? For many reasons!

Firstly, how can you grow your business if you don't know what the finances look like? Secondly, if HMRC came knocking asking questions, do you think they'd accept the answer "I don't know" to any of their questions? Absolutely not!

So on that note... here are ten practical bookkeeping tips to help you stay on top of your finances:

1. Keep Detailed Records of Income and Expenses
   Maintain accurate records of all income and expenses, including invoices, receipts, and bank statements. How you do this will depend on your business type and what works for one company may not work for another. We recommend storing copies of documents in a cloud storage space with a back up to ensure items can be found easily in the future if needed.

2. Set Aside Time for Regular Bookkeeping
   Dedicate specific time slots each week or month for bookkeeping tasks. Consistency is key to staying on top of your finances and preventing backlog. Add a reoccurring event to your calendar which you can

3. Use Accounting Software
   Invest in accounting software that matches the size and complexity of your business. These tools can automate tasks, produce reports, and offer insights into your financial performance. Our main accounting software is Xero, they offer multiple different packages for different business sizes and requirements

4. Track Expenses Closely
   Monitor your business expenses closely to maximise tax deductions and maintain a clear picture of your financial outflows. You want to be checking these regularly, weekly or monthly, to ensure you're business isn't wasting funds on unnecessary expenses. This will also aid you with point 1 as you won't be searching for receipts or invoices from old transactions.

5. Reconcile Bank Statements Regularly
   Regularly reconcile your bank statements with your accounting records to identify discrepancies and ensure accuracy. This will aid the business in knowing where funds are being spent and also ensuring sales invoices are being paid on time.

6. Separate Personal and Business Finances
   Keep personal and business finances separate to simplify bookkeeping and ensure clear financial records. If you're a limited company, it is a legal requirement to keep your finances separate however we advise all of our clients including sole traders to have a separate business bank account for clarity on business finances.

7. Segregation of Funds in the Business Bank Account
   Set aside a portion of your sales into separate 'pots' to avoid any cashflow issues when tax bills pop up. We recommend having separate pots for each tax bill your business type would need to cover. For example a VAT registered limited company with employees would have a VAT pot, a corporation tax pot, a PAYE pot and an emergency funds pot. We advise the emergency funds for any business expenses that pop up unexpectedly. By utilising these pots your business will pre-empt paying tax bills without facing cashflow issues.

8. Stay Informed About Tax Obligations
   Keep up to date with tax regulations and deadlines to avoid penalties and ensure compliance. At the very least, keep an eye on our blog here at Hazel House where we will post any tax changes as they arise. We recommend joining HMRC's monthly and quarterly webinars where they keep business up to date with any changes direct from the horses mouth.

9. Seek Professional Advice When Needed
   We advise utilising Dave down the pub as a source of advice with your finances. We recommend consulting with an accounting or financial advisor to ensure any advice you receive is legal and accurate.

10. Review Financial Reports Regularly
    Regularly review financial reports to assess business performance and make informed decisions. At a minimum you should be reviewing the financial status of your business annually, we recommend reviewing it monthly to assist you in making business decisions within the financial year.

    Top tip: Enquire with us at Hazel House to see how we can help your business with the bookkeeping!

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