Posted 6 years ago by Jon
Do you want to experience a zen-like peace-of-mind once a month? Well, we have a simple recommendation.
Create a strong routine for staying on top of your business finances and follow it in your accounting software on a monthly basis. This will help you stay on top of your money and ensure you’re maximising your cash flow. It also helps you avoid that sinking feeling when you need to file your VAT return and have to go back over three months worth of expenses, receipts, and transactions.
A good monthly routine will probably only take about two or three hours to follow. Although all businesses have slightly different needs, the suggestions below can easily be adapted to your requirements. We recommend following this process at the end of each month, when you do your monthly payroll.
If you bill your clients at the end of each month for costs incurred, then make sure that you capture and itemise all of those costs and add them to your invoices. Review your project time slips, goods supplied, and services rendered.
Once all your monthly invoices are up to date, send them out to your clients. Sending all of your monthlies out on one day makes it easier to track them for late payments, as they will likely all have similar payment terms.
Next, you will want to check your accounting software accurately reflects all the transactions you made in the last month. This is a process called reconciliation, and we explained how to do it here. Go through every account you have - bank, credit card, PayPal, etc, and ensure all transactions are properly recorded and accounted for.
After you’ve reconciled, you’ll be able to see if anyone has failed to pay their invoices If so, now is the time to chase them. Your first reminder can be polite and simply request payment as soon as possible. Later reminders can be more strict, and could include interest for lateness.
Now is the time to look through all the receipts and expenses you’ve paid out of your own pocket. Ensure that you’re properly recompensed for them, bearing in mind tax rules on apportioning expenses to your business. You might also want to set up monthly expense deductions and rebates, based on ongoing usage of areas like home office deductions, utilities etc.
Look at any bills that are due to ensure you have enough in your various accounts to cover them.
Ensure that your taxes are up to date. If its a VAT or Tax quarter or month end, ensure that your records are all up to date and that you submit your returns to the relevant tax authorities. Make sure that you have paid your PAYE and National Insurance contributions from the previous month.
Ah, it’s the fun part! Time to transfer your salaries from your business into your personal account. This is also a good time to look at any taxes you may owe, or prepaying your tax and other payment expenses (like national insurance).
That’s all the main parts of your monthly accounting done, so it’s time to look at how your business is doing. Review your dashboard and the various reports to understand the financial health of your organisation. You can then make decisions about future budgeting, spending, and payments.
Now you have finished all your business accounts, it’s a good idea to spend a few minutes looking at your personal money situation. Review your personal bank statements and credit card bills to ensure you recognise all the transactions. See how you’re doing against your household budget to make sure you have enough money coming in to meet your commitments.
Finally, there are a few things you can do now to secure you and your business’s financial future.
And that’s it. We believe following this simple guide on a monthly basis will help you stay on top of your accounting and finances, reduce your stress and anxiety, and help your business be better prepared for the future.