Top 10 Accountancy Tips for Beginners
In our line of business we are often asked for hints and tips by business start-ups or for advice on how to make a phoenix company a better success than their last business. Therefore I have compiled the following useful top 10 tips on how to achieve this below:-
1. DELEGATE – Firstly, I would make sure that you seriously consider whether you believe you are capable of doing a good job on your accounts & bookkeeping yourself or whether you would be better to delegate this task to someone else. Far too often people attempt to do every task within their business due to either cost constraints or naivety when the fact is that a business start-up is far more likely to succeed if you focus on what you do best and leave the other stuff to the professionals. By doing this you will probably find that you are able to win more business because your service is better or you give proper attention to the correct tasks which in turn will leave you with more funds to pay somebody to do your accounts or bookkeeping.
2. SYSTEMS – If you feel that you are capable to do your own accountancy or bookkeeping then my next tip would be to ensure you have the correct systems for you. This can be the software package you choose or the procedures you put in place to do the general bookkeeping to then pass on the accounting to a qualified accountant but either way careful research and consideration should be given to systems at it will save you a whole lot of time and money in the long run.
3. BUSINESS PLAN – I will then always recommend that you do a business plan, whatever the size of your business as by producing this and regularly updating it, you will be able to understand what your goals are and keep track of how you are progressing with achieving these goals (not to mention that if you are seeking finance a business plan is also a must).
4. CASH FLOW FORECAST – Cash flow is one of the biggest causes of company debt, and in turn insolvencies, therefore time should be taken to forecast future sales based on estimates, historical data and current figures. This can help identify periods when money will be tight and therefore help you plan to overcome this or also to identify when you will have surplus funds available to invest in the growth of your business. It is also worth stating that if you are going through growth in your business then a cash flow is without fail the most important task for you as once completed, you will avoid making less money, or losses, as a result of monitoring the extra costs you experience coping with the increased turnover being done (this is called over trading).
5. MAINTAIN PROPER RECORDS – It goes without saying (but I will say it anyway) that another important task is to maintain proper records, this means keeping your receipts and payments in order (by date) and separate from home records or associated businesses as the better the records you have the easier and cheaper it will be to get your accountancy done.
6. KEEP THINGS SIMPLE – A top tip given to me was to keep things simple by purchasing in round numbers (e.g. Fuel that costs £60 will be £10 for VAT and £50 net which is far simpler to record saving time and money). This also includes flat rates for sales rather than complex discounts.
7. DATES OF INVOICING – For those of you that are VAT registered, one thing to bear in mind is that given that most people have to submit a VAT return every three months, if you were to invoice a load of sales in your third month then you must include those sales on your vat return and therefore pay the vat on them (sometimes before you have been paid for them). However, if you were to wait until the fourth month then you will have received the money for those sales well in advance of when you have to pay the vat on those invoices. Therefore wherever possible I tend to invoice early every quarter and avoid invoicing late in a quarter.
8. REGULAR UPKEEP – By this I mean that bank reconciliation and bookkeeping works should be completed as regular as possible. This way any mistakes will be picked up early and time is saved as receipts and payments are in your current knowledge rather than forgotten about and time is needed to work them out.
9. CONTRACTS – To avoid losing customers, you should consider tying them in with a contract, this way you will get advance notice of them going elsewhere and plenty of time to either talk them into staying with you or time to replace their business with new work.
10. GOOD DEBT RECOVERY PROCEDURES – This is possibly the most important tip as it is pointless doing any work if you don’t get paid for the work you do. Therefore, my advice is to start well by completing credit checks on all your customers. If they are high risk then they should either be avoided or be asked to pay up front so you don’t lose money when they go bust. All invoicing should be done accurately with correct names, addresses, references, products and services to avoid dispute and increase your chances of recovery if legal action is required. Then I would also recommend the introduction of delivery note sign off sheets or quality sign off sheets so that the customer signs when they have received and/or are happy with the products or services you supply so that they cannot dispute this later on.
Also, do not get caught up in the fact that you may have won a massive contract but not consider the effects if they do not pay. Larger businesses (particularly construction companies) are notorious for being poor payers as they know the legal system inside out. If you win a big contract, get the above procedures right, or consider not taking it in if it takes up 80% or more of your work as the 20% of contracts you are left with if the large contract goes elsewhere will not be enough to pay you increased workforce.
So, what do you think of my top 10 accountancy tips for beginners? – I’d love to have your feedback so get in touch.