Over the past 5 years of running my own business I've had to learn some basic accounting. I started off with keeping simple records on an excel spreadsheet. This is the bare minimum which I'd recommend to anyone starting their own business. Write your income in one column and your expenses in the next. Keep all of your receipts. It's a good idea to start as you mean to go on so buy a few ring binders. Use one for your bank statements and one for your purchase invoices.
If (like me) you are liable to leaving bits of paper hanging around then find a place to store them. I have an in-tray in my cupboard where I put all of the invoices and bank statements that come in. Then every few months I go through them and sort everything out, input it in the computer and file everything away.
Ideally you want to sort out your accounts every 1-3 months. It makes it much easier to figure out any problems as you go along. You can also use your bank statements to check that you have accounted for everything.
Increasing complexity
A couple of years into running my business I realised that I needed some proper accounting software. I decided to use Sage and have been now using it for 3 years (www.sage.co.uk). You can either buy a version for your computer or use an online version. There are of course other software packages you can use so do shop around and find what best fits your needs.
Have a think about what you need out of your accounts. For us there were 3 main areas: 1) ensuring we are compliant with the law 2) being able to understand the figures from our business in order to plan for the future and 3) to see if we could afford a mortgage. It was for these three reasons that in addition to using Sage for our book-keeping we also took the step of using an accountant.
Employing an accountant
Last year we made the decision to employ the services of an accountant. To give you an idea of costs she charged us £550 for the year to be available for advice and to prepare our end of year accounts, and our individual and partnership tax returns. This was definitely value for money as our accountant helped us identify various errors amounting to far more than we paid her.
We still do the day to day book-keeping as above (although you can pay for that service too) but having the ability to accurately account for everything has enabled us to keep a much closer eye on our business and gives us the facts to inform business decisions.
That's all for now! I'll be writing about some specific accounting topics in the future...
