Top Bookkeeping Tips

top bookkeeping tipsIf you have decided to look after your bookkeeping yourself, it is essential that you prepare it to a high standard for the following reasons:

  • Ensures you are using accurate information when you make management decisions.
  • Decreases your accountancy fee costs.
  • Decreases your risk of fines from HMRC, as they can fine a business up to £3,000 for bad record keeping.

General Bookkeeping Recommendations

The following are some top bookkeeping tips that I give to clients:

  • Use a business bank account, only use it for business transactions, if you need money for yourself, transfer it from the business account in the appropriate form of drawings/salary/dividends/reimbursed expenses to your personal account, so that you don’t have to wade through personal expenditure receipts when preparing your books.
  • Reconcile your business bank account on a regular basis, to ensure that all business expenditure and income is captured accurately. One of the most common ways that businesses can save tax, is by including all their business expenditure in their accounts, so often items are missed, whether it is mileage, professional subscriptions, stationary paid for personally etc. Several years of these items soon become significant values.
  • Use an appropriate system depending on the size and complexity of your business, a multi-million pound business needs something more sophisticated than manual ledgers, likewise a small sole trader will not require an all-singing all-dancing expensive software system.
  • If you use a software based accounting system get some training, whether it is an official course or a one-to-one with your accountant to show you the basic transactions.
  • Keep up to date with your bookkeeping, commit to preparing them weekly or monthly so that you have up to date information, this is essential for cash flow forecasting, chasing debtors and knowing which suppliers need paying.
  • Once the bookkeeping starts taking up too much of your time you need help, it is time to hire a part-time bookkeeper or outsource it to a bookkeeping service.

Essential Bookkeeping Elements

Here are some basics that should be essential elements of your bookkeeping:

  • Sales ledger – this records all your sales invoices, ideally including invoice date, invoice number, customer name, brief description of sale, VAT amount and rate if relevant, invoice amount, date paid, method of payment. You may also wish to categorise different types of sales, e.g. labour and material.
  • Purchase (supplier/bought) ledger – this records all your purchase invoices (receipts), ideally including invoice date, invoice number, supplier name, VAT amount if relevant, invoice amount, date paid, method of payment. It is also essential to categorise different cost categories, e.g. Cost of sale, Employee Costs, Fixed Assets, Rent, Stationary, Marketing, Travel, Entertainment etc.
  • Bank reconciliation, this ensures that all bank transactions are matched against your bookkeeping records.
  • Business credit card reconciliations.
  • Full PAYE records, I recommend using a basic software system for this, as it is essential to ensure full compliance.
  • Keep full VAT calculation details along with copies of VAT returns submitted.
  • Keep full CIS calculation details along with copies of CIS returns submitted.

Summary

This is just a brief introduction to bookkeeping; if you would like to review your current bookkeeping system do not hesitate to contact us. Let me know if you have any top tips for ensuring that you keep on top of your record keeping requirements.

2016-10-23T17:20:12+00:00 January 20th, 2012|Accountancy|8 Comments

About the Author:

Nicky Larkin
Nicky Goringe Larkin is a Chartered Management Accountant who founded Goringe Accountants Ltd. - British Accountancy Awards 2013 Runners Up and awarded 'Highly Commended' accolade. Nicky is also Chair of the regional Federation of Small Businesses (FSB) as she is passionate about ensuring that Small Business issues are heard at the local and national level.
  • That is really a great post Nicky! I used to be pretty bad with bookkeeping myself. Ever since I became a bestselling author and long before Inc Magazine voted my company as one of the fastest growing companies is that I need to keep my business and my personal accounts separate. As in the future they can really become messy and it is difficult to keep the tab of all the expenses from a single account

    • Thanks Daniel. Yes so important to get into good habits early on, as it can be very difficult to untangle a poor set of books of they are kept badly.

  • Great tips! Bookkeeping can be learned online and though you are not a bookkeeper it is pretty easy to understand but it will take time to do it hence; the best thing is to hire a bookkeeper while you focus on more important matters for the business.

  • Good advice. Also want to note that for doing bookkeeping by yourself, need to know at least bookkeeping basics. And also must follow legislation changes (this is very important)

  • Good job Nicky, great tips, I’m really happy I found this article. Also, let me say I like the way you write, makes it really nice to read. I’ll take a look around the rest of the site, hope your other stuff is that interesting as well.

  • Good advice and tips for bookkeeping. Thank you for this post.

  • Nicky, I agree with the tips you have given. If not managed correctly, bookkeeping can create a lot of mess which is not so easy to clear up later on. And the use of simple language in the post makes it easier even for beginners to understand. Thanks for sharing.

  • Thanks for sharing this.

    I find that the main service my clients request is bookkeeping. It is the one thing that the majority of them just do not have time for. This can often lead to frustration on their part and can lead to trouble further down the line. This article will allow me to give them some brief tips on how they can make things easier for themselves and for me.