Bookkeeping for small business is not rocket science. For the majority of small business owners it gets put off just because running your business has to take priority.
Is there an easy way to do bookkeeping for small business? And what do you need to keep for the tax man? Follow our 5 step action plan and you will be in control!
1. Take action
Don’t delay! Follow this simple step by step guide today, or put a time in your diary this week to make a start to your bookkeeping.
2. Tools Of The Trade
On your shopping list, you need just three readily available things:
a) A lever arch file, one you will enjoy using b) Plastic punched pockets c) A set of dividers, labelled for each month
3. Get Filing
For each month, start with the business bank statements at the front. Behind that, copies of any invoices you have sent, and then bills like telephone. Finally at the back, the loose receipts in the plastic punched pocket. Remember, any expense in your accounts without the receipt could be disallowed against your profits by the taxman. So this filing and sorting can really save you money.
4. Start A Spreadsheet
A spread-sheet is great place to start until your business is big enough to warrant an accountancy package. If you are not VAT registered you will need just one worksheet. First, label the columns. You need a date column, a payee/payer column, an amount column for expenses, and an amount column for income.
If you are VAT registered, it does get more complicated, so you will need separate worksheets for income and expenses, and Net, VAT and Gross columns.
Copy the transactions from your bank statement on to your spread sheet. Extra columns for different expenses will help you work out what you are spending your money on.
5. Total The Lists
For each month, check the beginning bank balance plus the income, less the expenses equals the bank balance at the end of the month. Cash expenses can be listed separately (preferably on a separate worksheet).
You have now recorded your income and expenses on a cash accounting basis, this means recording your transactions on the date you paid or received the money. Only certain businesses can record their accounts for their self assessment tax return this way. Who is eligible? Unincorporated businesses beneath the VAT registration threshold will be able to start accounting for their income and expenses using a simplified cash-based regime for financial years starting from 1 April 2013.
Don’t despair however. You have made a start to your bookkeeping for your small business! Congratulations! By keeping track of your income and expenses, you can make the right decisions for the future.
Claire is FCA, Xero Certified Partner. Passionate about small and start-up business. Co-Founder and Director of Accounts Resource, an outsourced bookkeeping and accounts service which won ‘Best New Startup’ Richmond Business Awards 2012. Mum to 11 year old George and 14 year old Rea, who keep her on her toes!
You can contact Claire and find out more at www.accountsresource.co.uk