Bookkeeping Essentials for WAHMs
If your business is not particularly numerically based then the idea of bookkeeping can be terrifying. Although there’s always a calculator to help you out understanding how to keep accurate records can be difficult because there are so many different things you need to know. The right system will make all the difference though and as long as you have a basic handle on your cash book and cashflow you should be heading in the right direction for successful bookkeeping. You can also cheat like me and simply hire an accountant but even with an accountant you need to keep some records in order (unfortunately).
You only need a few simple things to run the most simple, basic set of accounts books:
- A cash book to record all money entering and leaving the business
- A sales ledger to record all money received and amounts owed
- A purchase ledges to track all outgoing
- A wages book to detail salary payments and National Insurance contributions (if necessary)
You can keep all of these accounting books manually, as in written by hand, but it’s much simpler and more effective to setup spreadsheets or even utilise specialised accounting software. Below we’re looking more closely at some of the most common questions asked by new business owners looking into bookkeeping.
Why are accurate, up-to-date books important?
From a legal perspective it is essential that you maintain accurate financial records and retain them for six years. However, accurately maintained books can also help you make better decisions when planning the future running of your business. With a full, detailed understanding of your finances you can tell if your business is performing effectively.
How can I utilise my books to benefit my business?
Accurate bookkeeping will show you exactly where your business is losing money or where you are overspending. They can show you the baseline you need to ensure your business will remain afloat and you may find areas you can cut costs and other areas where you can invest. Not having a clear understanding of your business finances is tantamount to driving blind and you’re giving your business a much lower success rate if you don’t try to understand them.
What is the simplest, most affordable counting method?
You can keep your own computer spreadsheets through Microsoft Excel. Spreadsheets allow you to create and maintain a basic cash book, to see an overview of your cash flow and you can also include debts and costs to your business on an overall spreadsheet. Keeping them regularly updated will provide the picture of your business you need.
Can I set up my own spreadsheets?
Some people are completely au fait with Excel or their chosen spreadsheet software and can simply whip up their own templates but if this isn’t you there are plenty of online options. You can find simple cash flow and cash book templates online although there are also specialists who create bespoke ones for your business for a fee. Some accountants are also happy to set up spreadsheets for you for a fixed fee or perhaps as a gesture of goodwill if you commit to using them for your end of year accounts.
What about specialist accounting software?
The majority of work at home mums and dads run micro businesses and therefore don’t need to invest heavily in software. It can be expensive but there are affordable options too such as Freshbooks. You can explore the options and it may be something you want to consider if running a product-based business as the money coming in and out is often higher than that of a service-based business.
Do I need to keep hold of EVERY receipt?
It may sound excessive but yes. Any receipt which you are putting down on your tax return needs to be kept. They provide evidence of purchases or expenses and in the event that the HMRC make a request to see your records, you can be sure you have every last one. This can mean storing bus tickets, petrol receipts and printer ink invoices. Making all business purchases on a credit or debit card is a sensible option as then the evidence is recorded on your statements in addition to receipts which are liable to get lost.
How much time will bookkeeping take up?
This is one of those how long is a piece of string questions. Bookkeeping can take as long or as little as you like. If you are strict about it and do it on a daily basis then you can be sure it will feel like it takes a lot less time than if you dedicate a single day a month to following up and filling in all your purchases and sales. Leaving it for any longer than a fortnight is not sensible as you’re going to be basing your business decisions on forecasts which are not exactly accurate.
Should I use an accountant?
There is nothing wrong with using an accountant and for many it’s a sensible option – it removes the strain of trying to turn masses of numbers into profits and incomes. There are plenty of other self-employed mums and dads who are working as accountants so you may even be able to find one through the WAHMWeb network. The majority of accountants will be able to give you a fixed fee for completing your annual tax return or a monthly fee for managing your bookkeeping.
A good accountant will more than justify their fee by the savings they make for you but of course doing it yourself is completely cost free.