Good bookkeeping is of critical importance to the sustained success of small businesses. That’s why we have put together the top five tips for great bookkeeping.
Understanding the implications and machinations of financial transactions can help business owners better understand their business and facilitate optimal decision-making.
With Xero, collaborative bookkeeping and accountancy in the cloud has never been more exciting. Over the last couple of years, we’ve seen our role as accountants transform from technical gatekeepers to trusted advisors.
Top five tips for great bookkeeping
1. Pay suppliers at regular but not frequent intervals
It is easy to succumb to creditor pressure and we all want good relationships but once your suppliers know that they can count on a regular pay run, perhaps once or twice a month at set intervals, they’ll settle down and you will have less to reconcile. Don’t pay anything that isn’t on the system awaiting payment. This allows you to take back control of your cash and bring suppliers into line with your best practice rather than chasing statements and making emergency payments.
2. Pay invoices not statements
The chances are that if you pay an invoice, Xero will recognise that payment, match it against the invoice et voilà! The bank reconciliation is all but done for you. If you pay a statement balance you have to keep the piece of paper hanging around the office to be sure you’re ticking off the items correctly, it’s time consuming and can get messy. This process has been made much easier with Xero’s new ‘Pay with TransferWise’ functionality.
This new functionality allows you to make bulk payments to multiple suppliers from Xero without ever leaving the platform and moreover Xero will remember and automatically reconcile the payments, turning two or three hours work into 10 minutes.
3. Update the ledger frequently
Use the Xero Expenses to snap receipts, email supplier invoices, use the Xero folder or snap them straight into Hubdoc, whichever method you use, use it a lot. Knowing what you’re spending and being able to reconcile the bank is critical to receiving meaningful financial information.
4. Keep cash to a minimum
When cash can’t be allocated to transactions it has to go somewhere and it often ends up going against directors drawings and being taxed as dividends. When you transact something through the bank there is always a tangible record of who was paid.
5. Go paperless
It doesn’t just help the environment, it helps you. Tell your contacts you only accept PDF copies of documents. Those documents will be sat in your email available to you within a few clicks and from there you can forward them to Xero, Hubdoc and anyone else that might need them. Use the extra office space for something you’ll enjoy!
A professional bookkeeping and accounting service is the cornerstone of a successful well managed business. It sits at the top of a funnel that will deliver higher profits, better margins and lower taxes.
We hope these five top tips for great bookkeeping with Xero will help you better understand how to scale the financial administration and operation of your business.
Linford Grey Associates. An intelligent friend. A trusted advisor.