15 Small business accounting tips that you need to know about

If you’ve recently started your own business, you probably don’t want the added stress of having to do the bookkeeping. We know that starting a small business is difficult enough as it is, so we have compiled the best small business accounting tips so that you don’t need to worry about it and can focus on running your business. The list contains all you need to do to keep your books tidy from record-keeping to making projections or choosing the best software for small business accounting.

1. Separate your personal and business finances 

You don’t want to have to sift through a long list of personal transactions to find all the work-related stuff. Instead of having everything together in one place, it’s much easier to open a separate business bank account for all your business expenses and transactions to keep everything organised. 

2. Set clear goals for your business

One of the best things you can do for your business as soon as you start is to create a clear list of objectives. What is that you want to achieve during the first year of your business? And the second to third year? Include data such as cash flow, minimum monthly profits and other benchmarks that are important to your business. By setting these goals you are more likely to meet your objectives. 

3. Keep your receipts

Keep all of your business-related receipts so that you can claim expenses. You can claim everything that you incur during the everyday running of your business, from travel expenses to domestic bills if you work from home, so don’t lose any of those valuable receipts.

4. Keep accurate records

If you don’t keep accurate records, you’ll end up wasting a lot of time when you need to find them. When the tax deadlines approach you’ll be happy to have spent some time keeping track of everything from the beginning. It’s much easier to record transactions as soon as they happen than trying to make sense of a bunch of receipts months after the sale took place.

5. Remember the tax deadlines

You don’t want to end up missing a deadline with HMRC. If you want to avoid fines, you need to stick to all the deadlines. And the best way to do this is to actually remember when those deadlines are in the first place, so make sure you have a calendar with reminders for all the key dates. 

For some of them, you’ll need to prepare weeks in advance, so you shouldn’t have to deal with the added stress of having to prepare a tax return two days before the deadline. 

6. Do HMRC’s e-learning courses

HMRC offers videos, webinars and free online courses full of small business accounting tips to anyone running their own business. HMRC’s website has everything you need to learn, from record-keeping to business expenses and information on how to complete an online tax return, so make the most of these free resources. You will learn lots of useful stuff and you can even ask questions during the webinars.

7. Outsource your accounting

When you start your own business, and especially if you are good with numbers, it might be tempting to try doing your books by yourself. There’s nothing wrong with giving it a go. However, if you don’t have much experience and knowledge about the intricacies of the tax system, it can be very difficult to be completely sure that you are doing the right thing. It is easy to forget a small detail or make a mistake that will result in you paying more tax. 

Finding an accountant that can help you from the beginning is one of the best investments you can make from the moment you lay the foundations for your business. An accountant is much more than the person that does your tax returns. They are there to give you the best small business accounting tips. They can help you optimise your accounts, advise you if you take advantage of any government-backed support that is available for your industry and let you know when you can take the next big step in growing your business. 

8. Learn about tax 

Corporation tax, Income tax, National Insurance, VAT, business rates…do you know which ones you actually need to pay? Your accountant will help you with this, but doing a bit of research and learning about it will make your life much easier and will help you ask the right questions should you need any more information. 

9. Check if you need to register for VAT

If you meet the minimum threshold of ￡85,000 you need to register for VAT. This is regardless of your business structure and it might not affect you during the first one or two years if you make fewer sales at the beginning. However, once you get to the threshold, you will need to charge your customers at the 20% rate of VAT, which means you need to keep this amount aside from every sale. 

10. Learn about invoicing

Set up an invoicing system that allows you to create professional-looking invoices and define payment methods easily. Accurate invoicing is a must for any business, so learn how all the basics work before you start billing your first customers. There is even software available that allows you to see when your invoices have been opened and even reminds you when they are due – all to help you get paid faster. 

11. Follow up on invoices 

So you now you’ve sent your first invoices but you are still waiting for your clients to pay you. Does this sound familiar? Sending out an invoice doesn’t mean you will get paid straight away. 

To increase the chances of getting paid earlier, send your invoices right after a job is done. Then, follow up with friendly reminders. Some accounting software apps allow you to automatically send these reminders so that you don’t need to do it manually every time. Another good idea is to offer early payment discounts to incentivise clients to pay faster.  

12. Use an accounting app for small businesses

There’s an app for everything these days and accounting is not an exception. There are various accounting apps that have been designed to help small business owners keep tracks of their expenses, transactions and taxes in one place. These apps help you to manage your financial records and they are also an invaluable tool for your accountant because they allow you to share all your business information easily with them at all times. 

There are different apps and software available in the market, but you need to find accounting software made specifically with small businesses in mind. At Steele Financial we use Xero, which is ideal for small businesses. In fact, we are sure it is the best small business accounting software, so we think you should definitely give it a try. 

The Xero app, which you can download here, allows you to manage invoices, reconcile bank transactions, create and send professional looking invoices, monitor your spending and much more. You can have the peace of mind of knowing that you have everything you need to manage your finances at the touch of a button on your phone.

13. Make the most of your small business accounting software

Once you get to grips with the basics of accounting with your app, it’s time to learn a bit more about everything you can do with your accounting software. Again, your accountant can be of great help here. There are literally thousands of integrations with other software and, depending on your industry and the clients you work with, you may want to add some of them to your accounting software to make your life easier. 

14. Make a projection

Use reports and projections to plan for the future. With just a general profit and loss statement you can start estimating where your company will be in a few years time. Financial projections can also help you stay on track, as you know where you need to be every month. Using accounting software and getting help from your accountant will allow you to create an accurate projection that will actually be useful in the future. 

15. Prepare for big expenses

Set aside money that you can spend if you need to replace equipment or upgrade any systems. Having some cash ready will also come in handy when the tax deadlines approach. After all, you want to pay your taxes on time every time if you want to avoid any penalties. 

Small business accountants Bristol

At Steele Financial, we know how important it is to find the right accountant to take care of your business. From our Bristol office, we have been guiding entrepreneurs from their very beginnings to the successful businesses they are today for more than a decade. We work with businesses all over the UK, so if you are looking for advice and personalised small business accounting tips, don’t hesitate to contact us and request a free consultation.