You had a great business idea, you’re managed to get it up and running, all is going well…then you look around, paper is piling up, Revenue returns are overdue – what went wrong?
You have fallen into the same trap that many new businesses fall into. You were so eager to get the business going, you put the boring and tedious business of setting up your bookkeeping on the long finger. The problem now is you really need some financial information to move forward. How much do I owe? How much do my customers owe me? Am I making money? However, it’s never too late to get a bookkeeping system set up.
Bookkeeping really isn’t that mysterious. It involves a set of processes, that if set up correctly, will keep you on the straight and narrow as the business grows. To describe bookkeeping at its most basic, it involves keeping a tab on what your income and expenditure are on a daily basis. Here are some pointers to help you get started:
1. Accounting package?
The first question you need to ask yourself is whether you need to buy an accounting package. In this date and age, for any business other than the simplest sole trader, I would recommend getting an accounting package. There are some very good packages that are extremely simple to use and these cost as little as €100 plus VAT. Generally, the benefits hugely outweigh the cost.
2. All in one place
Get in the habit of putting all of the documentation relating to your business in one place – even if this is a shoebox.
3. Do it yourself?
Once you have established how you are going to record your transactions, you will need to decide if you are going to do the bookkeeping yourself or get someone to do it for you. Another option is to get some training on the basic bookkeeping and do this yourself to keep costs down. This is a very cheap investment compared to what it will cost you to fix your accounting errors later on. You can then have this person look at your accounts on a monthly or bi-monthly basis and verify your work and produce reports for you.
4. Set a time
If you do most of the bookkeeping yourself, set a specific time each week to do this task. This will enable you to keep on top of the paperwork. Most people don’t enjoy bookkeeping and tend to leave it at the bottom of the to-do list. However, this is not wise as it will just build up and be all the harder to tackle.
5. Folders, folders
Set up a series of folders labeled: bank, customer invoices, supplier invoices, payroll etc. This way you will know exactly where to find them once filed.
If you have a large number of supplier invoices, file them with a reference that you also use on your accounting system. This will make it very easy to find them in future.
If you operate a payroll that is anything other than the most simple, it is highly inadvisable for anyone who doesn’t have experience in this area to operate it themselves. Outsourcing your payroll is extremely cost-efficient and you can relax knowing that your Revenue returns are done correctly and that your employees pay is right.
8. Bank account
Open a separate business bank account as this will allow you to track all business transactions easily and make the reconciliation of your bank account a simple process.
Make sure you keep track of any business expenses that you pay personally ie out of your own pocket. You need to be reimbursed for these costs.
10. Use it!
Lastly, you have gone to the trouble of setting up a bookkeeping system. Now you need to ensure that you use it. It can be an invaluable tool in helping your business.
As your business grows, you may need to periodically review the way your bookkeeping is set up. For example, if you need to keep a more detailed record of stock, an inventory element could be introduced to your accounting package. Likewise, as you become more used to reading the reports produced by your system, you can expand the range of reports to give you more specific information. Once you get used to it, you will be amazed at the extra knowledge you gain about your business.