Bookkeeping records

Good Bookkeeping: How To Keep Financial Records

If you run your own business, it’s essential that you keep accurate financial records.

Bookkeeping doesn’t have to be time-consuming, and staying up to date can save you money, make your business more efficient and help it grow.

Here’s how to make it easier to manage your books.

Get the right bookkeeping system for your business.

Any new business must set up a system as soon as possible. You’ll need to be able to keep records of expenses, income and taxes from the start.

Make sure the bookkeeping system you choose is easy to use and fits in with your day-to-day activities. There is a range of options available, from keeping paper records to using accounting software. Online systems can be easier to use as they automate calculations, allow you to run reports and give you access to the data you need.

John Leonard, the tax partner at Brennan Neil & Leonard Chartered Accountants and a member of the Sage Accountants’ Network, says most of his clients have switched to electronic records.

He says: “It’s good news, as it makes things easier. Cloud software is also a great way to go. It makes a huge difference as we can access clients’ records to help them or spot any issues early.”

Have a schedule

It pays to set aside regular time to manage your books. This could be first thing in the morning or at the end of the day. It’s essential to keep on top of things. Little and often is a good approach and makes it easier to stay up to date.

John says letting things pile up can lead to challenges for his clients. “We often get information well in arrears, sometimes only at year-end,” he points out.

“Up-to-date accounts can be beneficial for year-end tax planning, as they let us look at opportunities for the business. If you leave it too late, you can miss out.”

It’s also vital that you don’t miss important deadlines such as VAT and corporation tax payments.

If you’re late making these payments, penalties can apply, and they can quickly add up. Keeping your accounts up to date allows you to see what you owe and makes it easier to keep track of your obligations.

Get the right advice.

Bookkeeping comes with its own set of rules which you may not be familiar with, so it’s essential to ask for support.

“Get advice about the things you don’t understand as soon as you can,” says John. “Your accountant can help with this – that’s what we’re here for.

“Don’t leave it until the end of the financial year, as by then, it can be hard to correct historical information.”

Reconcile your bank statements

Matching the information in your accounts to your bank account’s transactions is an essential part of bookkeeping. It ensures all income and expenditure is accounted for and acts as a check to ensure everything balances.

The software can help make this easier by automating the process. For example, accounting software lets you import your bank statements, and the software will automatically match the transactions with the information in your accounts. You can see exactly what’s been added and make amends if you need to.

Keep an eye on your invoices.

Late payments can cost a business. Not only do they affect cash flow, but it also takes time to chase late payments – time that could be spent building your business and selling your products and services.

So you must follow up as soon as possible, issuing a second invoice and calling to find out if there are any issues.

If you choose, you can apply additional fees for any late payments. The government says these late fees can be used if the price is not received within 30 days (or within the timescale stated in any contract, if that’s longer).

Take advantage of any training.

For John, training is one of the essential elements to managing your accounts.

He says: “It’s worth investing in training, as it helps you make the most of your software and the information from your accounts. There’s a perception that software can do everything, but you also need a working knowledge of how accounting works while it helps.

“We’d advise getting training from your software provider or from an accountant or bookkeeper who has the necessary skills.”

Use the data in your accounts to understand your business.

If you’re spending time on your accounts but not using the data to give you insights about your business, then you could be missing out.

John says: “One misconception is that producing accounts is just for the Revenue and Companies House. But they should be a tool that you use to monitor the performance of the business.

“A lot of the time, people focus on the time it takes to do their accounts, rather than the benefit of the insight.

“The real advantage is that your accounts can tell you if you’re making a profit and where the business is spending too much. If used correctly, they can tell you where your business is going.”

How to start a bookkeeping business: Top tips to help you succeed

Thinking about starting your own bookkeeping business? If so, you’re in the right place to take your first steps as you go from idea to reality.

There are many reasons why you might want to start a bookkeeping business. Maybe you’ve worked as an in-house bookkeeper for a business, and you’re ready to take the plunge for yourself.

Maybe you feel redundant, and giving it a go alone allows you an excellent opportunity to take control of your destiny.

Or perhaps you’ve always had a burning desire to start your own business, are good with numbers, organised, looking for flexibility, and want to do something that will help clients achieve their goals.

No matter the reason, running your bookkeeping practice can be highly fulfilling.

So, if you’re interested in starting your own bookkeeping business, read this article to discover the key steps you need to take.

What’s the difference between a bookkeeper and an accountant?

The terms ‘bookkeeper’ and ‘accountant’ are occasionally used interchangeably, but they are two different roles.

A bookkeeper keeps track of money coming into and out of business by maintaining accurate financial records.

Bookkeepers can help small and medium-sized enterprises (SMEs):

  • Prepare for tax season.
  • Keep on top of day-to-day cash flow.
  • Efficiently run their finances.

Characteristics of becoming a bookkeeper include being accurate in your work and having a good understanding of financial topics.

Some bookkeepers also offer commercial brokering services, which involve helping businesses get the best deal when renewing insurance, buying new equipment or leasing company vehicles.

Catherine Pyman runs her own bookkeeping business.

She says: “Bookkeepers keep accurate accounting records for a business to enable the business owner to view financials.

“These can then be sent to the accountant to produce the year-end accounts. Bookkeepers also prepare….and offer tax returns and payroll duties.

Claire Adams started her business at Papertrail Bookkeeping after she left her job for 27 years.

She says: “We reconcile bank accounts [making sure the software matches the actual bank statements], we process payroll and everything that entails, we complete personal tax returns, final accounts for sole [proprietors], and accounts/corporation tax returns for micro entity businesses.”

What does an accountant do?

There are numerous tasks that accountants perform for their clients. Among them are the following:

  • Gauge the financial situation of businesses and further communicate the information to the relevant authorities.
  • Prepare financial statements as part of the accounting process.
  • Use unique skills due to the analytical and complex nature of accounting.
  • Act as a trusted adviser to businesses.

How much should you charge for your services?

There’s no clear answer on how much you should charge. Factors to consider include:

  • Your bookkeeping experience.
  • The needs of your market.
  • The services you’re offering.
  • The size of the business you’re working with.

Generally, you’ll charge either an hourly rate or a monthly fixed fee. You may even negotiate a retainer fee with some (or all) of your clients.

Adams from Papertrail Bookkeeping says bookkeepers generally charge around $25 per hour, “but it does depend on the work taking place”.

She adds: “I tend to charge my clients a fixed fee to cover everything, so the client knows how much they’re paying upfront.”

Setting your fees and getting your pricing right for your bookkeeping business will take a bit of work but don’t feel that you need to price yourself too low.

Remember, you’re selling your expertise and adding value to clients who need what you’re offering.

How software can help to manage business processes

Digital software can help you monitor the workings of a business in real-time. You can then report analysis from those numbers and enable your clients to make better-informed decisions based on their finances.

Despite its name, good accounting software isn’t just for accountants. It can be used for your bookkeeping business, allowing you to view your clients’ finances and create financial reports, among other things.

And by using a cloud accounting solution, you’ll be able to access the numbers on any device, wherever you are.

That means you can work with your clients in real-time to go over their bookkeeping and highlight any queries with ease.

How to start a bookkeeping business

Ready to take the first steps to start your own bookkeeping business? Here’s what you need to do.

Do your research and create a business plan.

Before setting up your bookkeeping business, it’s essential to do your research. Questions to ask include:

  • Who will your clients be? Perhaps small businesses (50 employees or fewer, for example), micro-businesses (nine employees or fewer), or sole proprietors.
  • How will you find clients for your bookkeeping business? This could include friends and family, your previous workplace, local advertising, website and social media marketing, and word of mouth.
  • What services will you be offering your clients? It could cover recording cash receipts, making bank deposits, paying supplier invoices, maintaining an annual budget, payroll management, and so on. What services you offer very much depends on your clients’ needs.
  • How will you work with clients? Are you going to offer a one-off bookkeeping service or an ongoing contract?

All these considerations are part of the bigger picture of your bookkeeping business plan.

Do you have one, three or even five-year plans for your business? What do you want to achieve with your bookkeeping business to employ staff, turnover and success?

It’s essential to do your research before starting so you’re clear about the path you want to follow and the goals you’d like to achieve.

These certifications are recognised industry-wide and cover everything from understanding business documents, managing books, posting and making entries, managing credit control, recording ledger accounts, and preparing trial balances and other statements.

Rules and regulations

After passing your exams and obtaining your certification, the next step is to comply with a series of rules and regulations.

The basis for financial reporting comes out of generally accepted accounting practices or GAAP. Bookkeepers should familiarise themselves with the Financial Accounting Standards Board’s Accounting Standards Codification, including guidelines for recording specific transactions.

Additionally, bookkeepers must follow document retention standards. An audit can happen to any client, so to help auditors and the ATO, well-kept records and records kept for the allotted period are critical during an inspection. Bookkeepers could be met with financial fines or lose their ability to provide services if they don’t follow retention standards.

Get insurance

You’ll need bookkeeping insurance as you’re providing an essential service for businesses. Mistakes can happen. General liability insurance protects you against claims made by unhappy clients and your employees.

It will protect your financial interests, help minimise disruption to your business, pay your fees if an unhappy client refuses to pay you, and cover the costs of rectifying a mistake.

We are setting up your business.

After passing your exams,  buying insurance and observing all the rules and regulations, you’re now ready to start your own bookkeeping business.

You’ll need to decide whether you want to work from home or in an office. There are likely to be more costs associated with setting up an office space, with rental costs being one expense to consider.

If you’re setting up at home, make sure you have a designated working area – you could turn a spare room into an office space, for example, or perhaps start at the kitchen table – and somewhere that you can store your clients’ paperwork.

Then there are the practical aspects to consider, including buying a computer or laptop, purchasing accounting software, business stationery, and setting up a business bank account.

Conclusion on starting a bookkeeping business

Setting up your own bookkeeping business can be very rewarding, not only financially but as a lifestyle choice.

In addition to this, you’ll provide an essential service to your clients, helping them run their businesses smoothly and efficiently.

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