The importance of bookkeeping for great financial management can often be overlooked when it comes to successfully running a business. However, consistent and accurate bookkeeping is crucial to ensuring the financial health of a business, and helps business owners make smart, informed decisions. This article explores the key practices that define good bookkeeping and how they can benefit your business.
What is bookkeeping?
Bookkeeping is the systematic recording, organising, and managing of financial transactions in a business. It involves tracking every financial transaction made by a business, such as sales, purchases, salary payments, tax payments, and more, and ensuring all transactions are categorised accurately and consistently. This process ensures compliance with legal and regulatory requirements by maintaining accurate records for tax purposes, and provides more reliable financial reports that can be used to make important decisions. So, what can business owners do to aid the bookkeeping process?
“Interestingly, I find that the most successful entrepreneurs don’t do their own bookkeeping. Of course, they keep their finger on the pulse of their businesses finances, but they know that the real benefit of implementing a robust digital system AND outsourcing their bookkeeping, is that it gives them back valuable time to work on the bigger picture and make informed decisions based on real-time financial insight.”
– Deborah Edwards, Harland Director
Tip 1: Maintain accurate records
The easiest way to do this is to use accounting software, Xero and Hubdoc, in tandem. Use the Hubdoc app to take a quick photo of each document, the analogue data is then digitally converted, and this links to Xero. You can then bin the paper records as they’ll be stored in the digital hub. If you’re not using this software, you’ll need to save all physical financial docs for each quarter ready to handover to your bookkeeper. These include receipts, invoices, and tracking all financial transactions such as sales, expenses, and payroll. Whichever method you choose, keeping detailed records ensures you have a clear view of your financial situation.
Tip 2: Keep business and personal finances separate
Keep things simple by separating business and personal finances. Open separate bank accounts and credit cards for your business, and try not to make personal purchases through the business cards. Benefits include easier tracking of expenses, clearer financial insight, simplified tax preparation, as well as enjoying any benefits offered by your credit card provider.
Tip 3: Use bookkeeping software
The development of accounting and bookkeping software in recent years has helped the bookkeeping process become faster, more accurate, and more efficient. We recommend 2 pieces of software to reduce your bookkeeping headaches: Hubdoc for digitally capturing receipts, and Xero for digitally managing business finances in real time.
Hubdoc
We love Hubdoc! It’s super easy to use, low-cost (free with a Xero subscription or around £10pm) and has so many benefits:
- No more physical receipts: Simply take a photo of your receipt, upload to Hubdoc, and then throw it away! Uploading records onto Hubdoc means all invoices and receipts are stored in one secure digital location, ready to refer back to should you ever need them.
- No more data entry: Hubdoc automatically extracts key data from receipts, invoices, and bills, significantly reducing the time spent on manual data entry and minimising the risk of human error when categorising transactions.
- It talks to other accounting software: Hubdoc integrates with popular accounting software such as Xero, QuickBooks, and others, allowing for a smooth flow of data between the programmes. Using Hubdoc in tandem with Xero, for example, helps your bookkeeper reconcile transactions faster and more accurately.
Hubdoc: 3 short videos to get you started
Upload records to Hubdoc in 3 ways:
- Email: Email PDF attachments to your bespoke Hubdoc email address i.e. when someone has emailed a single invoice, you can simply forward this on.
- Online: The best option for uploading multiple invoices quickly. Scan in your paper records, login online, and upload JPG, PNG, or PDF files. Helpful if you have formats other than PDF, or if you have multiple invoices on one document (in which case, be sure to switch to the multi-page split option).
- App: Download the app to take single photos of your handwritten or paper receipts. Simply ensure the photo is taken on a clear, flat surface with no obstructions.
Xero
Xero is our accounting software of choice for real-time bookkeeping. Used in tandem, Hubdoc and Xero help to quickly and precisely categorise invoices and receipts, then reconcile transactions within the bank. Xero also allows you to check aged payables (overdue bills) and receivables (unpaid invoices); Set-up reoccurring bills or invoices, and access a range of reports that will show you the financial health of your business.
5 tips for best practice bookkeeping using Xero
- Connect your bank feed to Xero: If your business uses online banking, you can connect your bank feed to your Xero account to automatically import the bank transactions. This saves a lot of time, as the alternative is to type up the bank transactions and manually import them.
- Every week, match-up bank transactions against receipts (reconciling): Xero will automatically pair bank transactions with matching sales or purchase invoices, simply double check that the software has matched the correct bank transaction to the correct sales or purchase then reconcile.
- Every month, check balances: At the end of each month, get into the habit of checking both your bank balance in Xero matches that of the physical statement, to ensure all transactions have been imported and reconciled correctly.
- Every month, check debtors and creditors: At the end of each month, check all debtors and creditor appear reasonable and correct
- Invoice through Xero: Create sales invoices directly in Xero, rather than using another method and uploading them separately. Sales invoiced can then easily be emailed straight to the customer if applicable.
Xero: 3 short videos to get you started
Next steps - Find the right method
Depending on the size and requirements of your business, you’ll need to carefully consider which bookkeeping option is right for you. To help, get a Xero plan recommendation.
We recommend option 3 for all VAT-registered businesses.
Option 1
+ Hubdoc only
£10pm approx.
———-
• Digitised records (bin those paper receipts)
• Financial records saved to central hub
• Export your data as a .csv file to use in an excel spreadsheet
Option 2
+ Hubdoc
+ Xero starter plan
£15pm approx.
———-
• Digitised records (bin those paper receipts)
• Financial records saved to central hub
• Limited access to Xero’s software
Option 3
+ Hubdoc
+ Xero standard plan
£30pm approx.
———-
• Digitised records (bin those paper receipts)
• Financial records saved to central hub
• Full access to Xero’s software
Option 4
+ Hubdoc
+ Xero standard plan
+ Outsourced bookkeeping
From £200pm
(inc. discounted Hubdoc/Xero subscription)
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Hand this task over to our experts
So, if you’re now feeling motivated to sort your bookkeeping habits once and for all but feeling confused about where to start, just get in touch via email or give us a quick call. We are on-hand to help and will happily walk you through the process.
