4 top bookkeeping tips for entrepreneurs
Entrepreneurs are funny fish when it comes to finances. They often keep everything related to the finances of their business in their heads. When you're an entrepreneur, this isn't as tricky as it sounds, because you know your business inside out...
It has some advantages. You always know (roughly) where you stand, you don't have to worry about learning fancy software, or having system crashes, and you can very easily adjust your budget without so much as booting up your computer.
The problem with this method is that it lacks any real organisation. There is no system or process in place and you can easily be blindsided by unpleasant surprises and subsequently miss things. Getting a proper handle on your bookkeeping will not only ensure you avoid those nasty surprises; it can help you reach your goals, manage seasonal shifts in income and stay on top of your cashflow. But when you're so used to just winging it, it's difficult to know where to start.
Here are four top bookkeeping tips for entrepreneurs:
1. Plan your major expenses
Planning ensures you don't miss out on opportunities, or find yourself scrabbling after a loan on short notice.
If you have big budget items coming up, like computer upgrades, a new website, or a major advertising campaign, add them to your calendar and cash flow at least 12 months ahead of time. If you can, look even further ahead, three to five years is ideal. If your work has any seasonal ups and downs, acknowledge them, make sure your cashflow truly reflects what you can expect to receive each month, rather than using the same predicted figure for every month of the year.
2. Track expenses
When you track your expenses you ensure you don't miss any tax write-offs and lose out on the money you could have claimed.
A credit card dedicated to your business expenses is a very simple, easy accounting system - you know, without checking each individual expense, that everything on that card's statement is business-related and that there aren't any lingering expenses hiding elsewhere. Card statements usually categorise your expenses, so you'll be able to see which transactions relate to which business activities. If you always use your card, you're far less likely to pay for things in cash, lose the receipt, and miss out on claiming that back against your taxes.
3. Record your deposits correctly
When you ensure you record all deposits correctly, you're less likely to pay tax on money that isn't income. Create a system for recording the information; it can be as simple as one notebook you always use, a spreadsheet, or online software like QuickBooks.
4. Set money aside for taxes
HMRC will penalise you and charge interest if you don't file your returns and pay your taxes on time. Anticipating your tax bills and setting money aside to ensure you have it ready and waiting to pay them will avoid any unwelcome extra charges.
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