14 Oct 5 essential rules of good accounting
Let’s be honest – not many people in business like accounting. Accounting is necessary, however, and, when done right, can make your business stronger, more profitable, and agiler. As a starting point, you should follow these five essential rules of good accounting in your business.
1. Keep good records
You need good records for a number of reasons, including the fact you will have an accurate overview of the financial position of your business when your records are up-to-date. When you keep good records, you will also spend less time on accounting tasks, including completing tax returns. In addition, you will have information to hand if it is ever requested by HMRC.
Some of the things you should regularly maintain and/or keep are receipts, invoices, and a cash book.
2. Always keep business and personal finances separate
Most people mix business and personal finances because it is easier, particularly if you are a sole trader. It makes accounts confusing, however, which in turn can mean it takes longer to complete tax returns. Also, it is easier for HMRC to understand the financial position of your business when its finances are separate from your personal finances.
3. Check your bank statements
To spot mistakes and problems quickly, and to ensure you understand what is going on in your business.
4. Don’t put off accounting tasks
Some accountancy tasks are better completed by an accountant, and you might contract out other tasks, such as bookkeeping. But if you do them in-house, make sure they are not put off. The longer you leave them, the harder it is to catch up. The best advice is to spend time on accounting tasks every week.
5. Get an accountant early
An accountant will help you complete your tax returns and ensure you meet your tax obligations, plus they can help your business by offering accounting, tax, payroll, and VAT advice. Your accountant is also a good sounding board for your business and can give you impartial advice on your current situation and any future plans.
By following these five rules, you will have a foundation for efficiently managed accounts in your business.