James Kennedy of "Urban Bicycle Manufacturer" Kennedy City Bicycles stars in a promo video for FreeAgent, an online book-keeping service. (FreeAgent’s chief accountant gives some book-keeping advice below). Kennedy City Bicycles is based in London; FreeAgent is based in Edinburgh.
Kennedy says using FreeAgent gives him "a sense of control". His business – and the company dog – is featured in the video. Kennedy is shown using the FreeAgent iPad app. He uses the cloud book-keeping service to do his invoicing, track his sales and monitor his bank and PayPal accounts.
BikeBiz asked Emily Coltman, FreeAgent’s chief accountant, for a bit of a back-grounder on book-keeping for a small biz. The software works for James Kennedy, but not quite so suited to retail businesses, said Coltman:
"We do have customers using FreeAgent for retail businesses, but it’s not as suited to them as it is to businesses who invoice, because there’s no integration with an EPOS product and stock items have to be entered manually line by line (they can’t be uploaded). Also there’s no BOM functionality. This makes it more suited to businesses like bike repair outlets, which don’t hold stock."
The four signs of great business bookkeeping
As a small business owner, you need to keep your business’s books to a good standard, not only because you risk being fined by HMRC if you don’t, but also because they can give you very useful information about the health of your business.
Send invoices quickly – and promptly chase them! Make sure to invoice your customers promptly, as it really can have an impact on when they pay you. Our research shows that sending an invoice within one week of finishing a project could get you paid much faster.
Make sure that you agree terms with your customers, ideally before doing any work. Will you charge them by the hour, or by piece of work done? What about extra hidden costs like travel time and admin time? When do you expect to invoice your customers, and how long will you give them to pay? Set all this out in clear terms of service so that you and your customers both know how you will work together.
Record expenses regularly instead of stashing them in a shoebox You need to track all your business’s costs carefully, both costs that you pay for personally and those that the business pays for itself.
Remember that software such as FreeAgent allows you to record your costs on the go using your smartphone.
Leaving costs out of your accounts not only risks you paying too much tax, but also you can think your business is making more money than it actually is, which can result in you running out of cash unexpectedly fast.
Always know your business’s cash flow position Perhaps the most crucial point about managing your books is the need to keep a watchful eye on money going in and out of your business. Which customers aren’t keeping to your payment terms? What bills are coming due in the near future? Have you enough cash to buy that new computer for your business? Most businesses that fail, do so for lack of cash, so make sure you aren’t at risk of running out.
Some bookkeeping software will let you set up automatic live feeds to pull your bank transactions daily from online banking into your books, so that you know what’s happening in your bank account every day.
Know your next tax deadline, and exactly how much you owe. HMRC’s powers to collect tax and levy interest and penalties for late payment are getting stronger all the time. Make sure you aren’t caught out.
Doing the books may not be the most enjoyable part of running your business, but it’s something that no business owner can avoid – and at FreeAgent we believe that investing just one hour a week to complete your record-keeping will give you accurate and timely information to help you run your business.