Establishing solid bookkeeping practices is crucial for the success of any startup or small business. By implementing our expert tips, you can streamline your bookkeeping tasks, making them easier to manage and more efficient.

This guide will explore essential strategies to help you optimise your bookkeeping processes, providing a solid foundation for your business’s financial management when you are a startup or sole trader.

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What is bookkeeping?


Recording - keep records of business expenses

Bookkeeping involves keeping track of the financial records, such as receipts, expenses, invoices, and bank statements in your business.

Reconciliation - compare and match financial records

You need to check transactions against bank statements to ensure accuracy and identify discrepancies.

Tracking - monitor accounts receivable & payable

Track money owed to the business (accounts receivable) and amounts owed by the business to suppliers (accounts payable).

Why do businesses need bookkeeping?

  • Financial management

    Bookkeeping is essential for a business's financial management. Accurate records help owners make informed decisions, monitor profitability, comply with taxes, and assess the business's health.

  • Make better decisions

    Good bookkeeping can help to grow your business. You can forecast your business' finances by keeping on top of your business' bookkeeping, helping you understand your business and learn how to grow.

  • Tax planning

    Bookkeeping helps businesses effectively plan and manage their tax obligations. By maintaining detailed records of income and expenses, companies can identify tax-deductible expenses and take advantage of tax credits and incentives.

Five essential bookkeeping tips tailored for startups & sole traders

1. Schedule time for bookkeeping

Create a structured approach to managing your financial records by dedicating specific time slots for bookkeeping. This proactive strategy saves you from scrambling to organise your books when the Income Tax Deadline approaches. You’ll be able to tackle your bookkeeping tasks consistently and efficiently, resulting in time savings and a stress-free experience during the financial year-end or tax season.

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How long does it take to do bookkeeping?

Depending on the transaction levels of your business, the time required for bookkeeping can vary. By understanding the factors that influence the time commitment, you can effectively plan and allocate resources to ensure efficient bookkeeping.

  • Low transaction levels

    Suppose your business has a low volume of transactions, such as a few invoices, receipts, or payments per week. In that case, you could typically spend around 15 to 30 minutes on bookkeeping tasks. With fewer transactions to record and reconcile, your bookkeeping process becomes relatively quick and straightforward. This allows you to focus more time and energy on other aspects of your business.

  • Moderate transaction levels

    For businesses with moderate transaction levels, which may involve several invoices, receipts, or payments per day or week, bookkeeping can take 1 to 2 hours. This includes entering transactions, reconciling accounts, categorising expenses, and generating necessary reports.

  • High transaction levels

    Businesses with high transaction levels, such as e-commerce or service-based companies with numerous daily transactions, may require several hours per week for bookkeeping. This can range from 2 to 5 hours or more, depending on the complexity and volume of transactions. It involves meticulous recording, categorising, and reconciling many invoices, receipts, and payments.

2. Categorise your expenses correctly

Consistency is key when categorising expenses and managing your cash flow. Establish clear guidelines or naming conventions for each expense category, and ensure that everyone involved in the bookkeeping process follows them consistently. This consistency eliminates confusion, simplifies data analysis, and provides accurate financial reporting.

We also recommend providing detailed descriptions to accompany each transaction when recording tax-deductible expenses as a sole trader or a limited company. This helps clarify the nature of the payment and its relevance to your business. For example, instead of simply categorising a transaction as “office supplies,” include specific details like “printer cartridges” or “stationery.” These descriptions enhance transparency and make it easier to track and analyse expenses in the future.

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3. Keep personal and business finances separate

It’s vital to keep your business and personal finances separate. Open a different business bank account exclusively for all business-related transactions. This clear distinction simplifies bookkeeping, providing a clean financial picture and reducing the chance of errors.

Establishing a dedicated business bank account is a best practice for any business, even if you’re starting. Connecting your business bank account to your online accounting software, such as Xero, allows you to streamline your bookkeeping process and make it more manageable.

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4. Use online accounting software

Online accounting software simplifies the process of organising your financial records. 

We think Xero online accounting software benefits business startups with a moderate number of transactions. Xero’s user-friendly desktop and mobile apps mean you can easily record and categorise transactions, store receipts electronically, and reconcile bank statements. Using software eliminates the need for manual data entry, reduces the risk of errors, and ensures that your financial records are consistently organised and up to date.

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Can I use Excel or Google Sheets for bookkeeping?

While Excel or Google Sheets can be useful for basic bookkeeping tasks, utilising specialised online accounting software offers several advantages, such as:

  • Automation and efficiency
  • Real-time updates
  • Automated bank integration and reconciliation
  • User-friendly dashboards and accurate reporting
  • Collaboration with your accountant and accessibility

We recommend you speak to an accountant about your transaction levels and they can help you decide if it is worthwhile investing in software for you business.

Automate recurring bookkeeping tasks

Another great bookkeeping tip is to use automation tools with your accounts receivable (money owed to your business).

Start by outlining clear payment terms and communicate the consequences of missed payments. However, this only sometimes ensures your clients will pay you on time. You may still need to chase them with reminder emails and phone calls.

But you might not have time to chase your clients if you’re a busy Startup. Good accounting software, such as Xero, has built-in automation features so you can set up automatic emails before and after their payment due date.

Use the template function to make the email say what you want. You can also make sure your clients are gently reminded that they owe you money.

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Connect your business bank account

This connection allows for seamless integration and provides you with several benefits:

  • Live bank feeds: This feature automatically imports your bank transactions, ensuring that your financial records are always up to date. It saves you time and effort by eliminating the need for manual data entry.
  • Easy bank reconciliations: Automatically match imported transactions with the ones recorded in your accounting system. This simplifies the bank reconciliation process, significantly reducing the time spent on manual matching and ensuring the accuracy of your financial records.

5. Collaborate with an online accountant to streamline your bookkeeping

Do you find yourself questioning whether your small business needs an accountant? The answer is an unequivocal yes. An experienced online accountant can make a world of difference, freeing you from the complexities of financial management and enabling you to focus on growth.

Managing your bookkeeping online offers numerous benefits, including easy access to your cash flow from anywhere. To fully leverage the advantages of online bookkeeping, finding an accountant who can match your digital presence is beneficial.

Opt for an accountant who offers streamlined communication channels suited to your preferences. For instance, we offer online bookkeeping services, and we use email, video calls, and secure client portals to facilitate efficient and secure document sharing. This ensures precise and timely communication, eliminating the need for physical meetings and reducing potential delays.

Contact us today to learn how we can provide proactive support tailored to your industry and business requirements.

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