Being in control of your finances is key to keeping your earning model afloat. That’s why it’s so important to stay on top of your books as a contractor or a small business owner as you have multiple income streams to deal with. Effectively managing your finances can do wonders for the process of bookkeeping for your small business.
It’s all too easy to end up looking back over your financial spreadsheets at the end of the year feeling confused by the figures that sit before you. That’s why SimpleBooks have set up this list of essential bookkeeping tips, to take the headache out of your business financing.
Put money away monthly
Regardless of whether you enjoy a profitable month or suffer through 30 days of slow business, you need to put at least 20% aside for the taxman.
It’s a good idea to set up a dedicated savings accounts, so you can put money away monthly to give to the HMRC later down the line. This can make a huge difference when it comes to paying your tax bill. Instead of scrambling around for funds, you can simply dip into your savings pot and send the money you allocated straight to the taxman.
Pay by card and make bookkeeping easy
This might sound obvious in today’s climate where card is king, but using this method of payment for the little things in life like a coffee with a client or a car fuel top-up en route to a meeting is a boon to good bookkeeping. This is because it makes reconciling your accounts much easier. Receipts can subsequently be used to claim back money spent on business associated transactions on the Self Assessment tax return deadline, at the end of the year.
Actively work on improving your cash flow
Staying on top of your books involves bringing in money before you pay money out. And to do this successfully, you need to work on your cash flow. If your income relies on clients, get strict on invoice payments and consider requesting money up front (you can encourage this by offering discounts for early payments). Late payments can cause severe issues with your cash flow, so the aim is to avoid this at all costs.
Make it simple for people to pay you by giving them the information they need from the beginning and always communicate regularly with any suppliers, to ensure that you have plenty of time to pay them. All of this will help you manage your cash flow effectively and ensure you remain on top of your books in the long term.
Bookkeeping software is the ace in the pack for anyone attempting to strengthen their grip on their finances, as you can organise your finances on the go by using premium bookkeeping tools powered by cloud technology. Online accounting software can help you with all the essential elements of bookkeeping, revealing how tax brackets work and giving you guidance on:
- VAT reports
- Bank reconciliation