These findings suggest that many business owners are struggling to get a grip of their finances, but that needn't be the case. By taking a few simple, but important, steps when it comes to bookkeeping and accounting, small businesses can very quickly get their books under control.

Setting up your accounts

Setting up your accounts properly is a crucial first step which will provide a good foundation for the financial health of your business. Chose appropriate accounting software and make sure you spend time to get organised by using a standard list of nominal accounts to record your transactions as revenue, expenses, assets or liabilities. Analysis your sales and costs into different categories so that by understanding the costs and revenues associated with each category, you can better understand their contribution to the business overall and take appropriate action. 

Inputting data

Accurate and consistent inputting of financial information is key. Your bookkeeper and accountant will not be able to properly manage your finances with inaccurate or poorly recorded information. If you have trouble with inputting financial data, consider hiring a bookkeeper or outsourcing to your accountant who will be far more accurate. This way you will also have more time to spend on growing your business.

Be consistent when recording nominal ledger codes, formatting and language. It's also important to write the transaction number on every incoming and outgoing invoice. If you do this it will be much easier for you, your bookkeeper and accountant to find these transactions at a later date.

Cash

It's critical that you update and check your cashbook daily with receipts, expenses and payments. This means that when you come to reconcile your bank accounts (which you should also be doing on a regular basis), you'll know your true cash position, which payments have cleared and which have not. If you can use accounting software that will get direct feeds from your bank accounts. These update your accounts automatically every day and just need to be reconciled. 

Debtors

One of the biggest problems many small businesses face is late payment of invoices. It's also crucial that you regularly record bank transactions (or use the software which does it automatically) to update your debtors. This way you can see who has paid, allowing you to focus your efforts on outstanding invoices and sending out payment reminders to these late payers. 

Creditors

Paying creditors before invoices are due can have an adverse effect on your cash flow. In order to understand how much time you have until you have to pay your invoices, run an age analysis report on a regular basis. Delayed payments to your creditors may damage relations, but invoices paid too soon may mean a lack of cash. Age analysis helps you maintain this balance. Most accounting software packages will run a report automatically. On the flip side, as your business matures and your cash flow stabilises you'll be in a position to take advantage of early settlement discounts, which represent a good way to reduce your total outflow of cash.

Checking 

While it sometimes might be painful to check your accounts, keeping an eye on your them will be a lot less painful in the end and will mean you will be able to spot any inaccuracies or unexpected amounts as they arise. Asking your accountant to take a regular look over your books should also help ensure you don't run into any trouble.

Filing

Filing is one of the more tedious tasks that business owners have to undertake on a day-to-day basis. However, being rigorous about filing important documents, whether physically or electronically, will save you huge time and effort at and will mean you have a better understanding of the financial health of your business on an on-going basis.

Make sure everything related to your accounts including emails, diary entries, contracts and any other correspondence is filed carefully and separately. Accounts and all documents relating to property should be retained and stored securely for the minimum period required by HMRC.

While the economic outlook remains uncertain, conditions remain tough for many small businesses. However, by following these simple rules, you can ensure that your business is on a sound footing and well prepared to face any financial challenges that may come your way.

Noel Guilford