All business owners have to face tax season, whether they like it or not, and when this time of the year comes, you need to be ready with a detailed record of all the transactions your business has entered in the past few months. Having a bookkeeping system helps—when you have updated books, you can easily comply with government regulations and filings.
What’s more, when you have a system, you can use it to improve your company’s financial standing. A recent report from consultancy firm Begbies Traynor has flagged a 15 per cent increase in businesses in “significant financial distress” in the UK, with more than 720,000 SMEs in the country currently experiencing issues with insolvency. Protect yourself and your livelihood—read on for five tips to help you strengthen your cash flow.
Stay on Top of All Transactions
A sound bookkeeping system starts with knowing exactly how much money enters and leaves your company. You need to take time every day to monitor your deposits and receipts and get them to match. It helps to have a journal aside from books for receipts and disbursements. All of the entries on your journal will fall under three main categories:
- Cash deposits to your account
- Service fees to your merchants
- Payments your account makes
A daily review of your journal will make it easy to record your transactions in the appropriate books, making it easy to do quarterly and monthly reviews and budgeting.
Track Your Business Expenses
Tracking how much money you spend for your business is easy to do if you have a business bank account. This separate account or credit card can even function as a basic accounting system for you. If you have a small company, the charges you make on a business credit card could serve as your primary record of all your transactions.
Pay with a card whenever you can since it makes record-keeping more straightforward. When you pay with cash, there’s a chance you could forget to log the transaction. You might also lose your receipt, which means letting go of the tax write-off you could get.
Do a Monthly Analysis of Your Finances
It is not enough to check your transactions daily. Set aside time at the end of the month to identify trends that could negatively affect your business. When you track your monthly income, you can monitor where your business does well, where it needs improvements, which activities generate plenty of income, and any seasonal trends. This information could help you strategise for the future.
Find the Best Accounting Software for You
Although cloud-based accounting software is excellent for getting your cash flow in order, it cannot replace professional bookkeepers or accountants who can make suggestions tailored to your needs.
However, it does help to have programs like Xero or Quickbooks, which let your bookkeeper manage documents, organise receipts, and file paperwork. Accounting software enables you to automate your invoicing and track your receivables.
With software, you can also create regular reminders and schedule late fees, which will be helpful if you have clients who are habitually late with their payments.
Hire a Bookkeeper or Accountant
One of the best habits a business owner can have is delegation. You must learn how to identify activities that you can assign or farm out to others to focus on the things you need to do.
Having a professional bookkeeper also means you benefit from their expertise. They know how to spot red flags and trends before they get worse, and they can save you from unnecessary fines or fees. Hiring someone to balance your books is much more affordable than having to fix your cash flow down the road.
In business, cash is still king, and developing these habits will ensure that your company thrives. If you have cash flow problems, though, it will be hard for you to get to a level that ensures your continued growth. Investing in a professional bookkeeper ensures your business’ healthy cash flow, makes you efficient and lets you focus on the things you do best.
With over 14 years of industry experience, you can count on Barrett Bookkeeping to stay on top of your financial paperwork. We provide accounting and bookkeeping services in Bristol, helping startups and SMEs with everything from setting up a company to payroll, cash flow forecasting, tax returns, and much more. Get in touch today for enquiries!