Bookkeeping is a critical part of running a small business. It involves the recording and organising of your financial data such as invoicing, expenses, payments and payroll. Bookkeeping is a time consuming task and demands an organised approach. Here are the Hour Hands top tips for SMEs to manage their bookkeeping.

Why it’s important to keep on top of your bookkeeping

There are two main reasons why every business needs to competently manage their accounting books. 

1. Knowing your financial position means you can run a financially healthy business. This includes only spending what you intend to spend (not over spending) and ensuring that anything you are owed is paid (cash flow is king!). 

2. Ensuring that you remain compliant with legal and financial regulations to avoid penalties.

It is important to get your bookkeeping basics right from the start, and to record and monitor all of your financial transactions. It’s also a legal requirement.

How to record your financial transactions

From expenses to payroll; invoicing to payments; expenditure to income – what is the best way to record your financial information? You have two basic choices: a simple spreadsheet such as a Google Sheet or Excel document, or invest in an accounting software package.

Spreadsheet bookkeeping for SMEs

A simple spreadsheet can be all SME needs especially if they have minimal transactions. Financial records can be manually created, stored and accessed from a computer whenever they are needed and most spreadsheets are free to use.  

The downsides include that there is a higher likelihood of human error such as forgetting to input a transaction or typing a wrong number. Manually creating records usually takes longer to do when compared to a digital accounting package, and spreadsheets can’t automatically send invoices or run payroll, as software can do.

Accounting systems for small businesses

An accounting system is a package of software that you purchase the right to use. Today, these are often cloud-based, which means data is stored off-site on a remote server.  Accounting systems are cost-effective, can be simple to use once they are set up, are secure, and when populated correctly.

They can provide all the relevant financial information you need at a click of a button. Most can be customised and your bank account data can feed directly into the application to ensure the very latest information. 

Of course, there are costs associated with using software including the need for an internet connection to be able to use and access the information.  The subscription costs themselves vary depending on which software you use but the cost of subscription vs cost of your time to manually input data may make this a moot point. 

The Hour Hands top tips for SMEs managing their bookkeeping

1. Record everything

Account for every incoming and outgoing payment. Record every expense as you’ll need this for your business and personal tax returns. 

2. Keep on top of your bookkeeping

File all bank statements and invoices, keep paid and unpaid invoices separate. Record all transactions in a timely manner (weekly is great), never miss a payment and always give clients a strict deadline. Yes, it takes time but it is easier to do this weekly than it is leaving it until a tax return or filing deadline looms.

3. Reconcile your bank statements regularly

Reconciling your transactions against your bank statements will help you to identify any discrepancies, mistakes and fraud quickly so you can deal with it. We recommend doing this monthly.

4. Stay on top of deadlines

If you miss a tax or filing deadline, you may be liable to fines and penalties. Add important regulatory dates to your calendar and always prioritise these activities.

5. Outsource where necessary

We know your payroll, invoicing, reconciliations, and reporting takes time. That’s why outsourcing your bookkeeping tasks is likely to save you a lot of time, money and stress in the long run. Seek out experienced bookkeeping professionals who know a range of accounting software packages as well as traditional manual accounting practices.

How can we help?

Hour Hands is made up of experienced EAs and very talented bookkeepers. All are ready to support you with those urgent and important tasks that you just don’t have the time to complete. From reconciling payments, to managing payroll, to managing those important dates in your diary and preparing your accounts ready for your tax returns – we can help you complete tasks and shift them off your to-do list! By outsourcing your tasks, you can flex when you need support – be it ongoing support or for a one off project or resolving a particular task. 

To find out more simply visit our website or call us on 01727 818262. We will ask how we can support you and offer a solution either on an hourly rate or package cost. The choice is yours – we’re here to help.