The best bookkeeping practices for a small business

Bookkeeping can be one of the most frustrating parts of running a business. Aside from being complicated, it’s also fairly time-consuming. That said, you can do a few things to make accounting for your business much faster and more straightforward. 

This article will list some of the best bookkeeping practices for a small business. We’ll provide a ton of suggestions, like tracking your expenses and using accounting software. The complete list of topics we’ll cover in this article includes:

• Keep your personal and business finances separate
• Track your expenses
• Budget often
• Hire an accountant for more complex jobs
• Use accounting software

Some small business owners use their personal bank account for business transactions. While this might seem like a simpler option, it’s not really worth it: if you don’t keep your business and personal money separate, your financial records will become very disorganised very quickly. Since organised bookkeeping is vital to running an efficient and successful business, separating your personal and business finances is one of the most important bookkeeping practices a small business could adopt. 

The best way to do this is to set up a business account, such as Countingup. There aren’t any significant drawbacks to setting up a business account: it’s usually a very quick and easy process, and most business accounts come with helpful additional features. For instance, Countingup is a two-in-one product, combining a business account with a ton of useful accounting software.

Once you set up a business account, your transaction history and financial information will be much easier to see and analyse. This can help you make better financial decisions, which is enormously helpful if you’re a startup owner with little experience in enterprise. 

Carefully tracking your business expenses is another vital bookkeeping practice for small businesses. If you don’t know how much you’re spending, you’ll always be in danger of running out of money. Without any cash reserves, your business will be in serious trouble, as you’ll not be able to buy inventory or cover your operating costs. 

Another key reason to track your expenses is to claim them back when filing taxes. You only need to pay taxes on profits, so you can deduct any purchases you make that are entirely related to running your business from your tax bill. For instance: if your income is £40,000 and you claim £10,000 worth of expenses, you will only have to pay tax on £30,000 of your earnings. 

Claiming expenses can reduce your tax bill significantly, so remember to look into the range of business expenses you can claim while doing taxes. In addition, if you operate your company from your own home, remember that there are also specific expenses you can claim while working from home.

If you use the Countingup app, recording your expenses is much easier due to the app’s automatic expense tracking. This feature further helps with paying taxes by organising your expenses into categories similar to the ones you’ll get on HMRC tax forms. This means filling in those forms is as simple as copying the information across.

Planning ahead makes most jobs easier. Small businesses should often make a budget to plan their spending since it prevents overspending. For example, you might create a budget every month or every time you have a new work project. 

However often you do so, the important thing is to create budgets regularly. By doing this, you’ll ensure you have a very up-to-date idea of how your business is doing and how much money you have to spend. 

Some business accounts can further help with budgeting if it has additional features that help with keeping track of your incoming and outgoing cash. For instance, Countingup offers real-time profit and loss reporting. 

A profit and loss statement is a financial document that shows how much money your company has made and lost over a set period. The Countingup app displays a real-time view of your profits and losses, updating as you make transactions on the business account. 

It also shows your net profit by automatically deducting the losses from the profits. By using Countingup, you’ll have a really up-to-date figure on your company’s available cash. 

You might find you don’t have sufficient accounting skills for more advanced financial management jobs like filling in a Self-Assessment tax return or preparing for an audit. In these instances, you may want to get into the practice of hiring an accountant. As they are a professional, they’ll be able to complete most of these tasks more quickly and more accurately than you would be able to do them.

That said, if you do hire an accountant, one potential obstacle is sharing your documents with them. This can be a frustrating process if your financial data isn’t all in one place, but if you use Countingup, it becomes much easier.

With the Countingup app, you can share your accurate, real-time bookkeeping data with your accountant in seconds with the tap of a button. This way, you won’t have to worry about being chased for missing data, duplication errors, data lags or inaccuracies.

One of the best bookkeeping practices you can adopt to save time is the use of accounting software. This software can automatically do a lot of the more difficult or repetitive bookkeeping tasks, saving you from spending a lot of time manually doing them

Countingup is the business current account with built-in accounting software that allows you to manage all your financial data in one place. With features like automatic expense categorisation, invoicing on the go, receipt capture tools, tax estimates, and cash flow insights, you can confidently keep on top of your business finances wherever you are. 

You can also share your bookkeeping with your accountant instantly without worrying about duplication errors, data lags or inaccuracies. Seamless, simple, and straightforward! 

Click here to find out more and start your three-month free trial today.