Bookkeeping and accounting

3 New Year’s Resolutions for your Micro Business

2015

Often the Christmas and New Year period is when many small business owners have more time on their hands to reflect on the year gone by and to start thinking about the year ahead. For those of you who are mulling over financial goals for the forthcoming year, I have come up with three key areas that you could gain from focusing on in the New Year.

1. Understanding your figures

Do you know what money you have coming in every month?

Do you know how much money you have going out of your business each month?

How much are your fixed costs each month?

Who were your best and worst paying customers?

Do you know what to do if you are not paid?

As a small business owner it is vital that you understand how your business is performing. Understanding your numbers can help you plan and make well informed business decisions.

2. Adopt an online bookkeeping solution

A very common misconception is that accounting software is only for Accountants and that it is expensive. Don’t be put off by all the “cloud” jargon surrounding online software. Many of these newer packages are written with the small business owner in mind, come free of accountancy jargon and are relatively simple and intuitive to use. Many of the online packages now available not only save you accountancy fees and time but can also allow small business owners to be much more in tune with their financial information.

3. Plan ahead

It is so easy to get carried away with the more exciting aspects of running your own business that the task of preparing financial goals and forecasts is often overlooked. Whatever stage or size your business is it is essential to Plan. Planning will give you the opportunity to ask the right questions of your business to avoid unnecessary costs and to charge the right price.

Prepare a plan of business goals and update these regularly. Prepare profit and cash-flow forecasts. If you don’t forecast these you are unlikely to control your cash and business properly. If you are doing all the above then you are well on your way to putting yourself in the best possible position to take your business forward in the right direction for 2015. If you are not doing all the above don’t panic – I frequently get calls from the most established and successful of businesses who after many years have recognised that they need help in these areas.

The most important thing is to recognise the problem and have the mind set to make the change. If you require any help do get in touch and remember that we offer a free no obligation consultation.

Karen Upcraft

The Winchester Bookkeeping Company http://www.winchesterbookkeeping.co.uk Tel: 07596 516670

Record keeping for the self-employed

income and expenses files

Record keeping is an essential part of running a small business. In part one of my blog I will be looking at why you need to maintain records and what records you are required to retain. Part two, next week will look at the different ways to record you income and expenditure.

A legal requirement

As a self-employed individual you are responsible for filing a tax return. Maintaining the records and documents used to support the numbers in the return is a legal requirement. You may have to pay a penalty if you don’t keep records of if you don’t keep records for long enough.

How long do I have to retain my records for?

You need to retain invoices and receipts for 6 years from the end of the tax year.

Records you are required to keep

Your business records must include records of all your sales, purchases and expenses. Examples of the records that you are required to maintain include: till rolls, bank statements, paying-in slips, customer invoices, accounting records, purchase invoices, cheque book stubs, credit card statements and mileage records. If you are claiming capital allowances for certain assets you will need to maintain certain records to support the claim you make.

You can scan and store the records electronically or you can keep the originals. Write on the receipts how you paid (cash, debit or credit card etc) to make it easier for you to reconcile everything later on.

Above all, keep your records (paper or digital) well organised by year, quarter and month.

Financial management

The above requirements may seem quite onerous but on the plus side if you maintain accurate and up-to-date records you will save time (and money if you have an Accountant) completing your tax return. There is less likelihood of you making an error and consequently you will avoid HMRC penalties. Accurate and up-to-date records will allow you to budget for tax payments and manage your business’s cash-flow effectively.

Do get in touch if you have any questions on the above – 07596 516670 and don’t forget next week’s blog on ways to record your income and expenditure.

Karen Upcraft

The Winchester Bookkeeping Company

What is a bank reconciliation and why you should be doing one?

pc and coffee

Either through a lack of time or dislike of bookkeeping chores many small business owners take cursory glances at their bank statements each week or month to confirm that the “mental tally” looks about right and fail to spend the time performing detailed bank reconciliations. This blog briefly explains why you should all be doing one.

What is a bank reconciliation?

Bank reconciliations are an important procedure that match the cash balance of the bank to the balance found on the company’s financial records. It is normal for a company’s cash book balance as per accounting records to differ from the balance per the bank statement due to timing differences. Such timing differences appear as reconciling items in the bank reconciliation statement. The purpose of the bank reconciliation is to detect discrepancies besides those due to normal timing differences.

Why should you be doing one?

1 – To highlights errors in your accounting records – such as transactions you may have forgotten to post or items that you have posted incorrectly

2 – Identify bank errors – such errors may be transposition errors, duplicate transactions or simply the correct amount posted but to the wrong account.

3 – Prevent overdrafts – the timing between your cash outflows and cash inflows can vary considerably. This is particularly relevant when your company is operating on very low cash reserves. Regular bank reconciliations can help you postpone payments that would result in overdrafts and bounced cheques.

4. To improve debt collection – you will be alerted to customers cheques not clearing

5 – Credibility and completeness of your accounting records – bank statements are an independent source of data and by checking your records against them helps to ensure your cash book figures are both credible and complete

How frequently should they be done?

Bank reconciliations are typically a month-end procedure but companies with smaller cash resources should perform them more regularly.

Which method?

Bank reconciliations can be performed either manually using an excel spread sheet or alternatively a better more efficient option would be using accounting software. Even the most basic packages have bank reconciliation modules which provide you with a final statement of unreconciled items.

Don’t forget….

to sort out the unreconciled items on a timely basis. I have come across some clients using software who believe the bank reconciliation job is complete when the process of matching bank transactions to cash book transactions is finished. This is only half the job done – make sure all unreconciled items are followed up and acted upon immediately.

Cash is the most vulnerable asset of your business and bank reconciliations are a key control helping to protect your cash through uncovering errors and irregularities. In short they are vital for any small business.

If any one would like any further advice or assistance on any of the above please give us a call – 07596 516670

Karen Upcraft

Director and owner of The Winchester Bookkeeping Company