Good financial records are vital to the health of your business – but that doesn’t mean that you are in a position where you can afford a bookkeeper. Do not fall into the trap of thinking you can “catch up” on your bookkeeping at tax time. You need to know what is happening in your business on an ongoing basis in order to run it effectively. If you cannot afford to outsource your bookkeeping, then do the capture yourself. If you implement these tips it should save you time and ensure your information is accurate:
- Take your accounting onto the cloud. The online options available today are phenomenal. Not only do they give you constant access to your information no matter where you are, they also have marvelous features that save you time: bank feed imports, recurring invoicing, automatic reminders and even bill imports with third party apps. Do yourself a favour and go online.
- Get someone knowledgeable to set it up for you. Day to day capture is relatively simple, but if your original accounts and templates were not set up correctly it can result in a very expensive headache come tax-time. You don’t have to find an expensive professional – chances are you have a friend or family member who has the knowledge necessary to set it up – but even if you do have to pay for the service, make sure the initial set up is correct. It saves time, money and tears down the line.
- Choose a program that is intuitive. Our personal recommendation for small business owners is Quickbooks Online – it has an intuitive and pleasant interface that makes it easy to find what you are looking for. The system was designed with non-accountants in mind, so the use of accounting terminology is limited and it is easy to fix errors. That said, the other programs available are also powerful, simple and easy to use. If you don’t like Quickbooks try Xero or Sage Online instead. Just make sure that the program you choose is easily accessible, relatively secure and has time-saving options like automatic bank feeds.
- Investigate the third party apps available for your program. An app like Receipt Bank is a fantastic way to backup receipts digitally with the added benefit of importing the data directly into your accounting program. You take a photo of your receipt in the mobile app, Receipt Bank extracts the vital information for you and you “enter” it into your books with the click of a button. Easy to use, time saving and your paperwork is backed up to the cloud for ten years. There are many, many time-saving apps available these days ranging from document entry apps like Receipt Bank to payment collection apps to invoicing apps to advanced CRM. Find the ones you need and make them work for you.
- Pay attention to detail. If you are registered for VAT then you need to issue and receive valid VAT invoices – make sure that your paperwork has the details required by SARS. When entering your receipts, make sure that you have checked for rounding of cents or the addition of VAT before you enter the final figure. You need to be sure that the amount on your bill matches the amount you paid in order to ensure painless reconciliation. If you are using a receipt-importing app, remember to double check details like dates and the spelling of supplier names before accepting the transaction. It is far better to spend an extra five seconds checking info at entry time rather than spending hours later on trying to find the error that has thrown your accounting records out of balance.
- Always enter supporting documents before entering the bank feeds. SARS works on the accrual system – very simply, this means that all your taxes are calculated according to the dates on your paperwork. They are not calculated according to the date you paid or received payment. This means that you cannot just do all your bookkeeping off your bank statements. You need to enter all your invoices, receipts, bills, card slips etc with all their dates correctly entered before you enter your bank accounts and petty cash. Most of the bank entries should actually be allocations to invoices and bills, you should have very, very few items that need to be entered independently.
- Choosing which account to use is relatively simple. Bookkeeping is a very literal act, if you buy stationery then it goes to the Stationery account, if pay for a webinar then it goes to the Training account. If you don’t have an account that matches a particular purchase, create a new one. It is better to create a new account called “Recruitment Costs” than to put an item to “Salaries & Wages”. Even though the items may be similar they are not the same and have different effects on a tax return.
- Use memos. It means that you add a few seconds to your entry time per bill, but it also means that when you need to find specific information you can do so super fast. Most programs will let you search by memo, or at the very least they will bring the memo up on a detail report, so you can quickly scan a list to find the specific item that you are looking for. You don’t have to go into intense detail, just the annotation of “New laptop” will help you find the bill if you need to take the laptop in for repairs in four months time.
- If you don’t know, ask. Even if you are doing your own bookkeeping, it is recommended that you have a tax consultant or an accountant who assists you at year-end. If you have a new transaction that you don’t know what to do with, ask them where they would like to see it when they are preparing your tax return.
- Never stop learning. There free courses, paid courses, YouTube videos, articles and books out there about bookkeeping, accounting and running a business. No time spent on increasing knowledge is ever wasted and everything you learn will help you become more effective as a business owner.
We don’t do accounting purely to submit tax returns – your financial records are a vital and powerful tool that you can use to drive your business forward. Don’t neglect them and don’t take them for granted.
These tips were originally published in YourBiz Mag Aug/September 2019