Profit is the reason why you could have started your small business without keeping books. It's doubtful, therefore, that you have a lot of knowledge about bookkeeping. You might think it's just addition and subtraction from gross expenditures, but it's far from the facts. Get in contact with us today for a free consultation if you are looking for a cheap Wimbledon accountant & bookkeepers in London!
The issue is that in the London area, many small business owners appear to underestimate bookkeeping, leading to devastating results in their accounts. Bookkeeping is something that if you want to become wealthy in your line of business, you need to take seriously.
1. Separate your personal and business bank accounts
Your capital and your personal money are your own, so you would find it strange to set up separate bank accounts for each of them. If you do not make the right separation, though, there is a risk of compulsive spending and jumbled finances. Jumbled finances are the last thing you want to have, particularly if the tax season is around the corner.
Free yourself from this hassle by keeping your personal and company bank accounts apart. Doing so will assist in enforcing fiscal responsibility and budget orderliness. You withdraw from your business bank account only to pay for expenses related to your company, and personal expenses can only be taken from your personal bank account.
For an extra degree of fiscal accountability, allocate a fixed paycheck to yourself from your company bank account. A paycheck will serve as a paper trail that will document your disposable income from your company's earnings. For example, you can set a fixed "salary" of 10 percent of your net income.
2. Make bookkeeping a habit
Procrastination will leave you facing a lot of papers and inaccurate financial details that could impact tax estimates. You will also not have a clear image of the state of the finances of your business, preventing you from making wise and timely decisions.
Therefore, you ought to make bookkeeping a routine, easier if it is regular. Regular bookkeeping will help avoid missing or duplicated entries of transactions that could complicate the accounting efforts. In the long run, you will also gain, because you will be confident that the financial results are based on accurate, timely data. In turn, a reliable and timely financial appraisal will help direct you to make important business choices.
3. Be meticulous and accurate in your paper trail
Cash flow mistakes, such as overestimating the money you have, will kill your small business. Through ensuring the accuracy and timeliness of your bookkeeping, you mitigate the possibility of meeting these cash flow issues. Document every single business transaction you have day-to-day. Establish a logical filing system for future accounting usage that would allow you to store and retrieve transaction data.
4. Monitor cash flow to stay above the red line
You will make it easy to track cash flow by doing your bookkeeping every day. Everything you need to do to check monthly expenses and net profit is to add and subtract columns. Make sure your receipts and collectibles with your financial reports are reconciled. It will help to discourage you from making risky decisions by seeing how your finances fare every day. Often, you will see how much you save.
5. Plan ahead
More than documents and calculations, there is more to bookkeeping. It involves constantly incorporating financial data to form trends that you can use to handle your finances. Amid the uncertainties stoked by Brexit, you can't afford to be unprepared. Plan about what happens after Brexit with the help of bookkeeping.
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