Not many people consider their business bookkeeping to be a fun task. It’s rare to find an entrepreneur who’s keen to leap out of bed every morning with managing their accounts as their motivation!
And yet, whatever kind of business you run, financial management is one of the most important daily tasks you can do. So getting your accounting right is an essential key element. The problem is that many small business owners find that keeping up to date with their accounting is a fight and often put it off.
The good news for those small business owners is that there are quite a few accounting hacks that you can use to keep your finances more organised and useful. All of the accounting hacks listed here fall easily into these categories:
- Automation
- Organisation
- Planning
From eliminating duplicate transactions and simplifying credit control to managing expense receipts and improving record-keeping, there are many relatively easy hacks you can take to get on top of your accounts.
Hack 1: Separate your accounts
The first important accounting hack is simply to make sure you separate personal transactions from business transactions — mixing them in a single bank account will inevitably lead to a long list of queries from your accountant! If your personal transactions are mixed in with your business transactions, you’re just going to get confused about what’s what.
Having a dedicated bank account for your business makes it much easier to track all of your company’s income, expenses, and transactions. With easier tracking, you immediately get improved visibility into your finances, meaning that you can then start using them to improve and grow your business. Remember that your financial management is an incredibly useful resource for business insights.
Having separate accounts also makes it easier to save time on your accounting tasks, so when it comes to accounting hacks, having separate bank accounts for you and your business is one of the single most important.
Hack 2: Time equals money
Leaving your annual accounts to the last minute can be costly. If you can get your information in order and to your accountant before the end of year rush, you are likely to be able to get a better price for the work.
Cutting it fine puts everyone under pressure and by submitting information close to the deadline, you are also giving your accountant the absolute minimum amount of time to spot and resolve potential issues or errors.
Hack 3: The devil in the detail
Another common issue accountants face is businesses not providing supporting documentation for transactions because they think a bank statement is sufficient. This is often not the case since income may have costs deducted before payment of a net amount, which will only become apparent to the accountant when they look at the underlying documents.
You might assume that your accountant only needs information about payments made and receipts received during the period in question. In fact, they need details of all income and expenses due, regardless of whether these were paid or unpaid as of the year-end.
Hack 4: Manage your assets
Many small businesses fail to maintain a fixed asset register, making it difficult to trace assets acquired throughout the year. This means potential eligible capital allowance claims could be missed, resulting in the business paying more tax than it needs to.
Failure to keep records of transactions (such as petty cash receipts) can also be costly since, without records, input VAT that could have been claimed will be lost. Staying on top of financial information and processing it promptly rather than delaying the processing of invoices is another simple step you can take to make the accounting process run more smoothly.
Regularly updating and reviewing financial information will prevent issues from arising further down the line due to your accountant dealing with out of date and/or incorrect information.
Hack 5: Categorise your expenses
Even if you’re new to business, the chances are that you’ve spent far too long trying to categorise your expenses when deadlines are approaching. Fortunately, good accounting software allows you to set up your expense categories ahead of time, and this alone is a massive time saver. When your categories are set up, all you have to do is record your expenses and assign each spend to the allocated category.
This is a straightforward accounting hack that can’t be beaten. Simply categorise your expenses into the relevant section, with categories such as:
- Insurance
- Marketing
- Business fees
- Rent
- Wages
- Utilities
- Travel
- Entertainment
- Office supplies
This gives you one major advantage. You’ll be able to easily spot which categories are being overspent on. If your spending on travel is getting out of control, you’ll be able to see that early and take steps to reduce it. This is one of those accounting hacks that immediately provides you with business insights that you’d otherwise miss if you aren’t proactive about your financial management.
Hack 6: Store your receipts immediately
Expenses can be tricky to keep track of if you’re busy running your business. Sure, you have a clear idea of your income, but monitoring your expenses often feels like a responsibility that you can keep putting off. Unfortunately, that approach leads to you hunting down receipts when you realise that you need them.
The other problem with a more haphazard approach to your receipts is that paper receipts will deteriorate over time. Paper receipts left in your wallet, car, or a box under your desk may even become completely illegible if they’ve been there a while. That’s going to leave you panicking when it comes to tax time!
That’s why it’s crucial that you keep your expense receipts updated as they come in. Make sure that all of your receipts are easy to read, with clear sections for the total amount, a description of the expense, and to whom the payment was made. If you add that information to your accounting software, there’s no risk of misplacing it or finding out that it’s been ruined by time or weather.
Hack 7: Have measurable and clear accounting goals
There are two elements to this great accounting hack. The first is to set daily goals for your accounting to ensure those tasks are completed within a reasonable time. If you skip this hack and get to work on your accounts whenever you can be bothered, then those tasks will quickly accumulate, and that simply means that you’re going to have to spend more time on your bookkeeping.
The second element of this hack is to have clear long term goals for your accounting. Some examples of common accounting goals include:
- Identify relevant deadlines.
- Reduce the number of debtor days with clearer debtor statements and follow-through.
- Establish realistic invoice payment times.
- Identify the KPIs for your accounting and use your financial management to meet those indicators.
Setting accounting goals that are both achievable and realistic can mean some initial work. But the clearer you are about how your business approaches your finances, the easier you’ll find your bookkeeping to be.
Hack 8: Connect bank accounts and credit cards
One of the secrets of easier accounting is to automate as much of your bookkeeping as possible. Connecting your bank accounts and your credit cards to your accounting software means that you can automatically have any payments (in or out) added to your accounts without lifting a finger.
Of course, this goes back to the first accounting hack on this list: have a separate business bank account. Make sure that you never use your personal bank account or credit cards to make or accept payments related to your business.
You can also connect any payment gateways that you use for your business. So if you use PayPal, Stripe, or even Shopify as part of your business, connect those gateways to your accounting software.
Hack 9: Manage your cash flow
Cash flow is such an essential part of business management that ignoring it can ultimately lead to business failure. It’s such an important factor that we’ve written a free downloadable guide to cash flow! Issues with cash flow are considered the reason why as many as 80% of businesses fail.
You can adopt many cash flow hacks to ensure that you’re always up to date with your incomings and outgoings. Adopt the following strategies if you want your business to be safer from cash flow management difficulties:
- Send out all invoices quickly to minimise late payments (you can even automate this process).
- Provide customers with more payment options.
- Keep your financial records up to date at all times.
- Make sure that all payments you make are effectively scheduled.
- Cut your business costs.
A lot of cash flow problems are the result of timing. If you have a supplier that’s a bit slow with their invoices, it can hinder your business. Especially if they then do quarterly catch up and end up sending out more than one invoice at a time. Take extra care over your cash flow, adopt a cash flow forecasting strategy, and your finances will be under much tighter control.
Hack 10: Weekly reconciliation
A great habit to get into is reconciling your accounts at least once a week. This is one of the keys to successful bookkeeping for a small business. By doing weekly reconciliation, you’ll find that it’s much simpler to spot mistakes. Trying to do your reconciliation months later means that those mistakes will be harder to spot, and unravelling those errors can get very complicated.
Weekly reconciliation also gives you a great opportunity to see any late invoices, so you can chase up those payments. Just set aside around an hour a week to update and check that all of your records are correct and aligned. This makes it much easier to ensure that your nominal ledger is always consistent, complete, and accurate.
Hack 11: Use cloud accounting software
You’ll find two options when you’re looking for accounting software. The first is the traditional desktop kind of software, where you download the software onto your computer. Cloud-based options are accessible via your internet browser.
The reason why cloud-based accounting software is so much more advantageous is that it’s capable of doing so much more. Most cloud-based software provides features that desktop types simply aren’t capable of. Most small businesses don’t have the budget needed to buy dedicated in-house servers and the rest of the infrastructure that’s needed for IT. With cloud computing, you don’t need that infrastructure.
From cybersecurity to maintenance to upgrades, cloud accounting software does it all. And it can still be accessed as and when you need it. You also get a level of support that traditional accounting providers can’t match.
Hack 12: Know your tax obligations
No business owner likes to think about taxes, and not only because it means making payments to the government. Taxes can get very confusing! Unfortunately, HMRC isn’t going to accept your excuses of confusion when it comes to the end of the tax year.
It can be extremely difficult to work out what taxes you need to pay to the government. Some taxes won’t apply to you, while others are vital. And mistakes can be costly, even resulting in your business failing. So you need to have a very clear understanding of your tax obligations. You will likely have to pay some or all of the following:
Income tax
There are different payment systems in place, depending on whether you’re a sole trader or a limited company. Make sure that you know which you need to use, as this will affect how much you need to pay and what your personal allowance is.
National Insurance
This isn’t technically a tax, but it’s often referred to as one. NI payments can get very complicated, especially if you’re a sole trader. There are different classes of national insurance, and factors like the Small Business Threshold will play a part in determining how much your NI contributions will be.
Corporation tax
You don’t have to pay this tax if you’re a sole trader. For limited companies, you’ll have to pay corporation tax on your business’s profits. There’s a deadline date too, so knowing if and how much corporation tax you have to pay is vital.
VAT
If your business makes more than a set amount each year, you will need to register your business for VAT. That will be true whether you’re a sole trader, an LLP, or a limited company.
Business rates
This is similar to council tax, but it’s aimed at businesses. So if you run your business from an office or have any kind of business premises, then it’s likely that you will have to make business rates payments. There are exceptions, and there is business rate relief available.
When it comes to your taxes, always make sure that you know what you have to pay, when you have to pay, and whether or not there are any options for reducing those obligations. You should also be aware that there will be different factors to consider if you’re using invoice basis accounting (as opposed to cash basis). Invoice basis VAT is a challenging subject to understand, so it’s essential that you learn about the difference between cash receipts and invoice basis accounting.
Focus on the process
Accounting might not be your favourite part of running your business, but it doesn’t have to be a pain. With the right approach and a little dedicated time, you can save yourself a lot of time (and headaches) by simply having a strategy and automating as much of your accounting processes as possible.
However, the single best accounting hack is what you’re doing right now. Learning more about your accounting options, reading about accounting hacks, and staying up to date with any changes to your taxes ensures that you’ll be making your bookkeeping easier and more stress-free.
If you use an accountant, ask them how they would ideally like to receive your financial information and when — this makes their task of checking and submitting your accounts more efficient and, therefore, cheaper for you.
Using a cloud-based accounting solution such as Big Red Cloud will make the account submission process much less stressful. You should strongly consider establishing a system like Big Red Cloud as it works for both you and your accountant.
Get in touch with the team at Big Red Cloud today to find out more about better management of your small business finances. You can even sign up for a free trial and find out for yourself just how easy we can make your accounting.
