Accounting for small businesses – top tips

As an experienced advisor to SMEs across the UK, I speak to business owners all the time who are wondering how to set up accounting for a small business. These are my top tips on how to set up your day-to-day accounting for success, to make keeping on top of your business finances simple and efficient for the long-term.

Use accounting software for small business bookkeeping

For some time, bookkeeping has been going down the digital cloud-based route and HMRC are switching to digital for all statutory filing, so we recommend using cloud-based digital software for bookkeeping to keep on top of your business finances.

By using accounting software for small business bookkeeping, a lot of the bookkeeping requirements for small businesses and sole traders are covered.

The accounting software for small business bookkeeping which we tend to recommend is Xero. It has all the functionality a small business would need to raise sales invoices, chase payment for those invoices and get cash into the business. The business’ bank account can also be linked to the software, so the bank and software talk to each other and transactions which go through the business bank account are downloaded, so you don’t miss anything.

Make the most of automation

With the introduction of Making Tax Digital requirements and the need to make VAT filings each month or quarter for businesses which qualify, being on top of the detail is critical. You need to have a clear understanding of the tax liabilities you’ve got outstanding and when they need to be paid. This is where software can support – it helps you to harness the benefits of automation.

We can give clients training on using cloud-based software so they can do as much of their bookkeeping as they are able to pick up – and we’re there to help if more capacity for bookkeeping is needed, or to assist with preparing management accounts.

Making the most of cloud-based software means harnessing the power of automation to ensure your accounting is in hand. It means business owners are able run their businesses more effectively, because all the company’s financial information is taken care of and organised.

The various cloud-based software on the market is developing all the time and there will be even more opportunities for users to make more use of automation in the future as that happens.

Keep on top of your business’ finances

Our main recommendation to clients is whatever the system they choose – whether it’s software or a spreadsheet – to regularly keep on top of it. There’s nothing worse than getting six or 12 months down the line and you’ve forgotten purchases you made for the businesses, what those purchases were for, and where the receipts are. You’ve got to review and update your bookkeeping, sales invoices, expenses and business banking transactions on a regular basis – if not daily, then at least weekly.

Cloud-based software helps with that because your transactions are all listed and, when you have five minutes, you can go through them on your phone or laptop and reconcile them.

If this practice becomes routine, then it can pay dividends in the future. When it comes to the end of the financial year and we’re preparing accounts and tax returns for a business, having up-to-date, reconciled accounts to work with means the process is a lot more efficient for us – and therefore, more cost effective for our services to the clients.

Do you need an accountant for a small business?

While it’s not a legal requirement to use the services of an accountant, there are many ways that having an accountant can benefit a business. Handling bookkeeping, tax and VAT filing as a business owner can be time consuming, and the priority for most business owners is working on their business – not keeping up with accounting tasks.

We work with clients to train them on using accounting software, to support them in their day-to-day bookkeeping, and to prepare their management reporting. The level of support which a client needs from their accountant differs from business to business, but all the clients we work with benefit from our support and guidance.

If you’re wondering ‘what can an accountant do for a small business?’, get in touch and we can talk to you about the value that having an accountant can bring.

As experienced accountants for SMEs, we’re here to help

At Prime Accountants Group, we work with businesses in various sectors and based across the UK to help them navigate their business accounting – so they can concentrate on growing their business.