A missing receipt isn’t a major problem for your business. But a month of missing receipts, unexplained payments, late invoices and unrecorded expenses might be.
Rather than developing a complicated bookkeeping system, you need a clear routine that keeps your records up to date and gives you useful financial information.
Here’s how to make your bookkeeping easier each month.
Keep your business and personal spending separate
Use a separate business bank account for your income and expenses.
If you run a limited company, you must keep its banking separate from your personal banking. Sole traders don’t have the same legal requirement.
However, even where you can use a personal account for business transactions, mixing personal and business spending creates extra work. You’ll need to identify personal transactions, record business costs paid from your own account, and explain unclear payments later.
A separate account also gives you a clearer view of how much cash your business has.
Record expenses as they happen
Don’t leave receipts in your van, wallet, or email inbox. Photograph or upload each receipt when you make the purchase. Most accounting software lets you attach it directly to the transaction.
Make sure the record shows:
- The supplier
- What you bought
- The date
- The amount
- Any VAT charged
- The business reason for the expense
A bank transaction shows that you made a payment, but it doesn’t explain what you bought and usually isn’t enough on its own to support a VAT claim.
Recording purchases straight away also means you won’t have to remember what an unclear payment was for several weeks later.
Send invoices promptly
Create and send your invoices as soon as you complete the work, deliver the product or reach the agreed payment stage.
Include a clear description, invoice date, payment deadline and your bank details.
Use sequential invoice numbers so you can identify missing or duplicated invoices.
Late invoicing delays payment and makes your records less accurate. It can also hide cash flow problems because your accounts don’t show money you should be collecting.
If you run a service business, create an invoice template in your accounting app. Add the job details and send the invoice from your phone as soon as you finish the work, rather than waiting until you get home or return to the office.
Connect your bank account to your software
A bank feed imports transactions into your accounting software. This reduces manual data entry and makes it easier to match payments with invoices and receipts. However, you still need to check each transaction.
Software might suggest a category based on previous payments. That suggestion won’t always be correct. A payment to one supplier could relate to materials, repairs, equipment or another type of cost.
Use automation to save time, but don’t rely on it to make every decision.
Buckler Spencer can help you choose and set up accounting software that suits the way your business works.
Reconcile your accounts each month
A bank reconciliation checks that your accounting records match your bank statement.
It can uncover:
- Missing transactions
- Duplicate entries
- Unmatched customer payments
- Unrecorded bank charges
- Incorrect dates or amounts
- Payments allocated to the wrong invoice
Reconcile every business bank account, credit card, payment platform and loan account.
Businesses with a large number of transactions may need to do this weekly. For many small businesses, a monthly reconciliation will be enough.
Keep VAT and payroll records up to date
If you’re VAT registered, check that you’ve accurately recorded sales, purchases, credit notes and supporting invoices.
Review unusual transactions before you submit your VAT return.
Payroll records should also match the payments leaving your bank account. Your accounts need to show gross pay, employer costs, deductions, pension contributions, net pay and amounts owed to HMRC.
Keeping these figures current reduces corrections and makes it easier to understand what your business owes.
If you could use a helping hand with your payroll or VAT calculations, payments or payroll, get in touch with our team.
Review unpaid invoices
Check your aged debtors report each month to see which customers still owe you money.
Match received payments to the correct invoices, investigate disputed balances and follow up overdue accounts. Doing this each month keeps your records accurate and stops unresolved invoices building up.
It also helps you spot customers who regularly pay late, so you can act before the problem affects your cash flow.
Use a month-end checklist
A checklist helps you complete the same tasks in the same order each month.
Your checklist might include:
- Raise any outstanding sales invoices.
- Upload receipts and supplier invoices.
- Record cash transactions.
- Match bank transactions.
- Reconcile bank and credit card accounts.
- Post payroll figures.
- Review unpaid customer invoices.
- Check supplier balances.
- Review VAT records.
- Investigate unclear transactions.
- Run your monthly reports.
Give one person responsibility for completing the process. If several people contribute, make it clear who handles each task.
Consider outsourcing the work
Bookkeeping takes more time as your business grows. You may register for VAT, employ staff, buy equipment, take out finance or process more transactions.
Consider outsourcing if:
- Your records keep falling behind
- You don’t trust your reports
- You keep losing receipts
- You don’t know what you owe in tax
- Your accountant has to correct repeated errors
- Bookkeeping takes time away from paid work
If your time would be better spent elsewhere, Buckler Spencer supports sole traders, start-ups and SMEs across Swadlincote, South Derbyshire and the surrounding area.
We can manage part or all of your bookkeeping, including VAT, payroll, management information, forecasts, tax planning and annual accounts. You’ll spend less time correcting your records and more time running your business.
Talk to Buckler Spencer about the support you need.