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How should you manage your accounts in your startup or small business? It’s a common question that we help clients with all the time.
The good news is that even if you’re not a financial whizz, you can still do plenty to help yourself and your small business. Here are our best tips for managing your accounts.
Use a cloud accounting package
Our most common tip is to get yourself on a cloud accounting package from day one of your business. Accountants like us can help you save money in paying for software such as QuickBooks or Xero. We also help you save time in the setup process – but you can also learn about and set up the software yourself.
But why bother? Check out this short video which explains the pro and cons:
A quick summary of the video:
Pros
- access your data from anywhere in the world, including on your smartphone.
- track invoices to make sure you’re paid on time.
- comply with Making Tax Digital requirements.
Cons
- input good data – you can’t skip this!
- cost – around £10–£25 per month.
- training time and learning curve.
Money’s tight when starting a business, so a common objection to cloud software is often the cost.
After all, you probably have Excel or other spreadsheet software installed already, and that can seem to be an adequate free option.
But we’d recommend that you treat the modest monthly fee of a cloud accounting package as a wise business investment. It could save you a lot of time and prevent hassles down the line, and remember of course that it’s a valid business expense for you to claim on your tax return.
Cloud accounting software helps you keep your records in a good way, so long as you follow some basic rules.
To get our clients up to speed, our cloud software recommendations come with a free 2-hour training session. Following the guidelines in our training means that those clients keep their end-of-year accounting fees down.
Keep your information fresh and accurate
Recording accurate, up-to-date information in your accounting software might involve connecting your account with a bank feed or supplying a CSV file.
Getting into the habit of good data logging via a cloud accounting package means that your accountant can log in and check that your records are correct at any time.
This can put a stop to potential issues growing out of hand at the end of the year. We’ve found that the sooner such things are nipped in the bud, the easier it is for clients’ accounts to sail through each year.
There’s no set period you should stick to when updating your accounting information, but most of our clients use either a weekly or monthly schedule. The beauty of 24/7 online access to cloud accounting means you can dip in whenever suits you.
Common mistakes when managing your accounts
We see a couple of common mistakes that crop up with our clients, so do your best to get these right:
- separate your business and personal income – it might be natural to think of income as being “all your money”, but that’s not right when you have a limited company from which you claim a personal salary. Getting this wrong can sometimes mean taking out more than you can afford and inadvertently creating a business loan.
- log expenses in the right account – it can be easy to attribute expenses to the wrong category. Cloud accounting makes this simple to fix. Because such mistakes are repeated when the software accidentally learns the wrong association, they can be spotted and corrected in one go.
Get the long-term benefits of managing your money well
As well as knowing you’ve got the right data so that there are no end-of-year nightmares, accurate record-keeping in your cloud accounting software means that your accountants can help you with other tasks.
For example, we help our clients with:
- estimating corporate tax implications.
- predicting pensions contributions.
- assessing capital allowance needs.
- planning dividend payments.
Top tips for managing your accounts
Here’s some of our best advice for startups and small businesses looking to get their accounts right:
- don’t manage your accounts by looking at your bank balance – use your cloud-accounting software to get a true view of your accounts.
- get paid on time – instead of assuming that customers will pay on time, check your outstanding invoices and chase up payment.
- charge correctly for your products and services – understand how your pricing affects your income and balance this with your expenses, so you can make adjustments to stay profitable.
Let’s sum up
These tips should help you take control of your accounts, but if you need more advice then there’s no need to struggle on alone. We answer our clients’ accounting questions all the time, and we can help you, too.
Follow us on Facebook, LinkedIn and Instagram for more top tips on starting your own business. Or if you have any questions please get in touch using the form below. We look forward to chatting with you.