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  • Writer's pictureNicola Fallon

7 Bookkeeping tips for small businesses

Updated: Oct 24, 2022

Bookkeeping is recording your business information and transactions so that you can monitor your income and expenses. Accurate and timely bookkeeping is essential so that you can have a better idea of the financial position of your business, which helps you to make decisions and make the necessary filings for your taxes.

If you’re starting your own business, you’ll probably be handling the day-to-day bookkeeping yourself at first. While bookkeeping can feel like a mundane distraction from the excitement of running your company, it’s essential to the success of your business.

Keeping on top of small business bookkeeping will save you time and money and be less stressful in the long run. Accurate bookkeeping provides a clear picture of how your business’s finances are performing and flags up early signs of cash flow or income problems.

Without a finance or bookkeeping background, small business accounting can seem daunting but our small business bookkeeping tips will make it easier.

1. Keep business and personal bank accounts separate

Having separate bank accounts for personal and business transactions will make your business bookkeeping as pain-free as possible.

It makes your business appear more professional and there’s no need to plough through personal bank account statements to find the business-related items and expenses come tax deadline times. HMRC can ask to see your personal bank statements if business income and expenses appear in there (do you really want them to see how much you spend at Nandos each month?).

Separate bank accounts is particularly important for limited companies as a limited company is deemed a separate legal entity, so you can’t simply use its money for personal reasons even if you own the company.

2. Check your invoices

This should be your main priority when completing your regular bookkeeping. You are in business to make money, but your customers need to know how and when to pay you and you need to have a system in place to keep track of payments coming in and, more importantly, overdue payments.

You will also need to keep copies of your invoices or other supporting documentation for all forms of income generated through your business or self-employed work.

The UK Government states that businesses should retain their tax records for at least five years after the 31st January submission deadline of the tax year in question. For example, for the 2020/21 self-assessment tax return, with a final submission deadline of 31st January 2022, you must retain these records until 31st January 2027.

3. Keep your receipts

One of the biggest issues businesses experience is misplacing or losing expense receipts. Without a record of your expenses, it is not as easy to prove your expenditure related to the business. Subsequently, you are unable to claim tax relief on these expenses when you submit your tax return.

This takes discipline, but the best way to stay on top of your receipts is to record them straight away. Organise them by date and write any notes on the receipt if the transaction isn’t clear. If you have access to a scanner then it’s a good idea to keep a digital record; you could even take photos and save them in folders on your computer.

Keep all expenses and receipts that relate to your business or self-employed activity, as these may be deductible from income when calculating your profits in your annual self-assessment tax return. You don’t need to submit these receipts in your tax return but it’s useful to have expense records to support all transactions should your accountants, HMRC or others need more information about your finances.

The same retention period applies for expense receipts as above.

4. Use accounting software

Using accounting software makes it easier to keep all your business’s financial records in one place. It will save you time and give you peace of mind.

There is increasing pressure on small businesses to digitise their accounting and tax reporting. Digital compliance is becoming a necessity given the emergence of Making Tax Digital (MTD). If you’re a VAT registered business, then you will need to submit digital returns to HMRC and this is compulsory from April 2022. Then, from April 2024, MTD for ITSA (Income Tax Self-Assessment) will apply for business owners with total business income above £10,000 per year, so it’s wise to invest in digital accounting software now to prepare for this.

Your first step to using accounting software, which would save hours of admin, could be to record your expense paperwork instantly using the Dext app or a similar expense scanning app service. This type of software allows you to send photos of your expense receipts from your smartphone directly to your accountant. You can also automate regular supplier invoices and bank statements as well as electronic receipts, ready for bulk processing.

5. Know your numbers

Knowing your numbers is key to the success of your business.

You need to know how much you are selling, how profitable you are, how much spare cash is in the bank and how much you owe. Without these key measures, you cannot make decisions about the future of your business.

By doing regular bookkeeping, you will have a clearer picture of your numbers. Using accounting software will enable you to pull off reports at a touch of a button to show your business turnover or profitability, but even if you’re using spreadsheets, you can still gain a good understanding of the financials in your business.

6. Save for tax

It’s a no brainer to think about putting money aside each month for your tax bill. Doing regular bookkeeping and knowing your numbers will help you work out your profit and, in turn, how much tax you must pay.

You’ll also need to ensure you have sufficient cash to pay tax when it becomes due. Unpaid tax incurs hefty penalties and interest. Make a note of the tax deadlines, keep track of your likely profit for the year and put aside some money each month to account for projected tax liabilities. Work with your accountant to schedule realistic tax payments and pay money on account so you can avoid sudden and unpleasant tax demands.

7. Hire a bookkeeper

If you want to keep your overheads low and avoid paying accounting fees, it is possible to look after your own bookkeeping. However, there are risks to this. The consequences of making mistakes with your own bookkeeping can be disastrous, particularly if this triggers an unexpected HMRC investigation.

Professional bookkeeping can help save time by taking the pain of maintaining your own records away, allowing you to focus on building your business and achieving the right work/life balance.

Virtual Accounts and Taxes can look after your bookkeeping on your behalf, saving you time and money to focus on doing what you do best – running and growing your business. We can also help you understand your business finances, monitor your cash balances, plan for future tax liabilities and pinpoint trends to help support important business decisions.

To arrange a free initial consultation about our bookkeeping services, call our team today on 0161 250 2219 or

If you want to continue with doing your own bookkeeping for the time being, but need further guidance, I can highly recommend Zoe Whitman’s book “Know your Numbers”, which is available to buy on Amazon:


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