Ensure your bank account balance matches your accounts
The cornerstone of your business’s finances is its bank account. Remember that cash is the lifeblood of your business and without an adequate flow of money it may struggle to survive, so you need to regularly keep track of how much cash you have in your business bank account.
If you’re not already doing so, check whether you can set up an automatic feed to pull this data from your bank straight into your accounting software in order to minimise data entry errors. Then make sure you check at least weekly, if not daily, to make sure that your bank balance is correct in your accounts and that all your transactions have been recorded. And remember if your bank balance in your accounts doesn’t match what’s in your bank, you’ll have to look back and find the difference; it won’t go away!
Look back at how you’ve paid for your costs
You may pay for business costs from the business’s own bank account, or from its credit card, or from your own back pocket. Make sure that you’re tracking these separately, so that you can easily see how you paid for each cost.
This is important because if you want your business to pay you back for costs you’ve personally paid for, then you need to accurately track the amount it can pay you. If your business is a limited company, you could pay more tax if the company pays you back more than it owes you.
Also, if your bank balance in your accounts doesn’t match what’s on your bank statement, a visiting HMRC inspector could be concerned that you’re concealing income and charge you more tax.
Review your books and make sure you’ve put all your costs where they belong.
Is your categorisation consistent?
When you’re deciding which category to put your costs into, such as stationery or postage, you may well find that some of your business’s costs could easily go into more than one category. For example, a monthly subscription to a software provider could be Computer Software or Subscriptions.
While there may not be clear-cut guidance from HMRC about which category to choose in these situations, make sure you allocate these costs consistently as they recur. That way, if your accountant needs to move the cost to a different category for tax reporting, it’ll be quicker for them to do that. Also, it’s much easier for you to track how much you’re spending in each category if you always put the same costs in the same places.
Go back over your historic transactions and make sure that you’ve categorised your costs consistently.
Close any cancelled invoices or bills
You may have had to cancel an invoice that you’ve issued to a customer, or a supplier may cancel a bill they’ve given you. If this is the case, make sure these items aren’t showing in your books any more. Usually the best way to do this is by creating a credit note and netting this off with the invoice or bill. This will also reduce the income or cost accordingly in your profit and loss account.
If you need help with your accounts, don’t be hesitant to seek advice. Charles A Sherrey are accountant specialists who could assist you manage your accounting books.