Managing your accounts
Managing your accounts is a fundamental part of running your own limited company. If you have never dealt with accounts and financial statements then it can be a daunting prospect, however thankfully in this age of electronic wizardry there is a wide range of software to assist you with these new responsibilities.
What exactly are my Accounts?
Managing accounts really means recording and organising transactions, preparing invoices and filing receipts. The way you handle and act upon information in a business environment is a key factor in the long term success of the company. You must have a clear and manageable system for entering and retrieving financial data about your company this will help you take care of completing your company tax return, filing your accounts with Companies House and monitoring your cash flow and available profits.
The financial transactions that take place in your business are essentially divided up into different accounts to allow you to see where the money is coming from and how it is being used in the business. This type of categorisation will enable you to see the assets, liabilities, income and expenses for the company from which you can generate financial statements such as the profit loss account and the balance sheet.
Traditionally businesses used to have a paper book for each account known as the ledgers, however these days such information is maintained in a computerised ledger system which is obviously much easier to maintain.
What is the best way to manage my Accounts?
Many businesses choose to entrust an accountant with some or all of their accounting responsibilities. However for those who would prefer to save money or do not yet have the finances to afford this service (which is very much the case for new companies) then the alternative is doing it themselves. I personally believe it is a valuable skill worth learning and as a business leader it will put you in a strong position whenever you need to make financial decisions about your company in the future. I wouldn't suggest that you learn the finer points of accounting but a basic knowledge will help you control costs and make more informed decisions. You also need to remember why you went into business in the first place and it is more than likely not to manage accounts , so a balance must be struck in terms of how much you do yourself and how much you outsource.
For those who choose to manage their company accounts in-house the most simple and reliable system would be to use a cloud based service like QuickFile. QuickFile is completely free to use and is ideal for those with minimal accounting and bookkeeping experience. With QuickFile you can generate professional looking invoices, link into payment services like PayPal, Worldpay and GoCardlesss and tag all your business transactions directly from your bank statement.
How often should I update my Accounts?
There is no definitive answer to this question although most individuals choose to update their accounts on a weekly or monthly basis. The schedule you set aside for updating your company accounts may be determined by the type, value and frequency of the transactions that your business is dealing with. If for example you are a shop keeper and you are taking regular small payments throughout the day then it is obviously not practical to input these as you go along so therefore you could record the total figure for each day and add this information into your accounting system at the end of the week. On the other hand if you are selling high value items on a less frequent basis and you need to produce invoices to give to your customers at the point of sale then you may log these transactions as and when they occur.
What should I look for when buying accounting software?
Most accounting packages will include the following features:
- Automatic double entry bookkeeping. As you learn how to use your accounting software you will become familiar with the method of double entry bookkeeping. Most accounting packages automate this procedure to ensure your accounts are always balanced.
- Automatically create invoices. When you record a sale to your customers most accounting software will automatically generate a sales invoice that can be issued to the customer as a statement of the amount payable (Including VAT if applicable), the product or service they have paid for and the available methods of payment. If the payment is not made at the point of sale then the invoice can also include a deadline and an early payment discount.
- Create and manipulate reports. One of the main benefits of having a computerised accounting system is the ability to instantly generate financial reports. These are particularly useful when completing your company tax return and submitting your accounts to Companies House.
- Automatically calculate VAT. Many accounting packages support automatic VAT tracking, this will enable you to enter your sales and purchases and simultaneously adjust a special VAT control account. At the end of your VAT period you can then see your net liability which will assist you in completing you return.
- Monitor cash flow. It is important for any business to monitor their cash flow this will enable them to ensure that they have the required capital to carry out their day to day business.
- Additional Payroll modules. The majority of accounting software providers can supply an additional payroll module that can integrate with the main accounts package. This means that when you pay yourself or an employee the software will automatically post payroll information to the relevant accounts allowing you to track you payroll tax liabilities as well as how much you have spent on each employee.
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