Setting up your own business is extremely exciting but if you neglect your bookkeeping, you run the risk of your start-up failing to take off. Business Garage offers top tips on how to manage your bookkeeping effectively if you’re setting up a business.
Of course you want to focus on fulfilling orders or providing a great service, and growing the customer base of your start-up. So bookkeeping can be low down the list of priorities for many new entrepreneurs. Here are our top tips on how to manage your bookkeeping effectively for your start-up:
- Keep your bookkeeping up to date
Letting those receipts pile up in a dusty shoebox is a common mistake (and guilty habit) for many people new to running a business. The more behind you are on your bookkeeping, the bigger the challenge will be for you to get on top of it. Little and often will probably work best for you when it comes to bookkeeping.
If you are not invoicing or chasing payment on a timely basis, your cashflow will suffer – not what your start-up needs! Equally, HMRC is strict on deadlines, and there are sizeable penalties if you miss them because you are not up to speed.
- Use bookkeeping software
Bookkeeping or accounting software enables you to keep track of your start-up’s finances, manage your cashflow, and produce insightful management account reports which are particularly helpful if you’re seeking investment. Making Tax Digital also requires VAT returns to be submitted online, so a software package that links up to HMRC makes this possible.
Business Garage partners with Xero. It is a popular online accounting software for small businesses, with a good range of functionality, can be accessed securely from the cloud and tailored as needed: from simple invoicing to more sophisticated reporting tools and features such as handling different currencies.
We look after many of our clients’ bookkeeping and management accounts via Xero. We have also managed multiple Sage to Xero conversion projects for various businesses, using our expertise to ensure a seamless transition.
- Organise your sales invoices
To avoid confusion and delays in receiving payments owed:
- Create a simple template that you can use each time, which clearly lays out a description of what the invoice is for, the amount owed, due date and your bank details.
- Keep the design clutter-free with easy to read text as many larger companies will scan the invoice, making blurred text or heavily coloured invoices harder to read later.
- Include the word ‘invoice’ (legally required) and invoice number, purchase order number if relevant.
- If your company is VAT registered, you must use VAT invoices, stating the VAT amount.
- Sole traders must also include your name and any business name being used, and an address where any legal documents can be delivered to you if you are using a business name.
- In the case of a limited company, you must include the full company name as it appears on the certificate of incorporation. If you have decided to put the names of your directors on your invoices, you must include the names of all directors.
- While you do not have to state payment terms, you should agree these up front and, in our opinion, always include these for clarity.
- You may also wish to include your logo to fit in with your branding. It looks more professional and makes you easier to remember.
- It is usually better to email a PDF invoice, rather than a postal invoice or a link to accountancy software. Follow up to ensure the invoice was received.
- Make sure you send the invoice to the correct person (agree this in advance) – often the purchaser of your product/service is not the person paying the invoices.
- Open a business bank account
Separate your personal and business finances and you will find it much easier to manage your bookkeeping. Paying by electronic transfer, credit or debit card will mean your bank statement provides you with a permanent record of the transactions – a free and easy way to keep track of payments.
- Manage your purchase ledger
Accounts payable is important for a fledgling business. You do not want to gain a reputation as a bad payer, but equally cashflow can be difficult to manage. Keep up with your payments and protect your business from cyber fraud by:
- Keeping your purchase receipts and a record of your expenses.
- Agreeing payment terms with your suppliers in advance, so that you will have cash when you need it. Align payment terms for your suppliers with those from your clients.
- Checking that the amount due on the invoice tallies, errors are easily made. Reject any invoices that do not match what was agreed.
- Implementing a purchase order (PO) system where possible. This allows you to agree from the outset the price and any payment terms.
- Checking payment terms – there is no need to pay the invoice before the due date but do try not to miss the due date and incur late payment charges. In worst cases, some vendors may refuse to supply you in future if you are badly overdue with payments.
- Ideally more than one person should approve any outgoing payments to protect against cyber fraud and ensure accuracy of payment.
- Being cautious about unexpected emails requesting payment – either roll your mouse over or hit reply to see the true sender of email (as emails can be disguised).
- Verifying all requests for changes to bank details (including internal emails) by contacting the sender by telephone.
- Equally, call new suppliers to check bank details for supplier payments, don’t just rely on an invoice you have received as this could be open to fraud.
The Business Garage team is professionally cautious and has meticulous attention to detail. We always use two levels of approval for any outgoing payments, so you can rest assured that your payments are always correct, secure and on time.
- Separate office space for your start-up
Working from home may be the ideal commute, however, it’s all too easy to be distracted by household chores, noise or family. When it’s time to concentrate on the bookkeeping, shut yourself away in a quiet room – you will be less likely to make costly mistakes.
Serviced office or co-working spaces are worth exploring, especially if you’re going to be conducting lots of business meetings. They can often be hired on an ad hoc basis, depending on your needs. In Oxfordshire, venues such as Milton Park Innovation Centre, Boston House in Grove or The Wheelhouse in Oxford offer smart office space of varying size with good facilities and easy transport links.
If you’re looking for a discrete place to hold a one-off meeting, Business Garage has a well-equipped meeting room available for hire at reasonable rates.
Contact Business Garage on 01235 433099 to find out how we can support your business as it grows.