Accounting 101: Setting Up a Bookkeeping System at Home

For any business, whether small, medium, or large, proper accounting practices is one of the keys to success. Being organised and knowing how much money you’re spending and how much money you have coming in is important for budgeting and managing your cash flow. As of 2022, 38% of adults in the United Kingdom are working from home, with around just over 5 million small businesses currently operating in the country. For these people, figuring out a basic system to keep the books in order is important, especially for freelance workers and small business owners. The following tips will help you set up a basic accounting system to keep your finances in order while operating out of your house.

Accounting 101: Setting Up a Bookkeeping System at Home

Open a Bank Account for Your Business

Once you’ve got your business up and running, registered, and ready to begin trading, the first thing you’ll need to do is set up a separate bank account for your company. According to LawBite, keeping personal finances separate from the company is essential for tax reasons as this ensures there’s no conflict of interest. Doing this will also protect your personal assets should the business fall on hard times. Setting up your business with an account that ensures high-interest savings rates is probably the best way to go about it.

Educate Yourself About Accounting

Another essential step to building an efficient home accounting system is to make sure that you understand the terminology and functioning of bookkeeping so that you don’t make any crucial errors. Understanding basic accounting terminologies such as receivables, liabilities, profit and loss statements, and balance sheet accounting among other things will make tracking finances easier. An accounting system is simply a way of tracking and monitoring every single financial transaction that you or your business makes to ensure that you’re not racking up unwanted expenses or keeping your debtors waiting.

Create Invoices For Instant Issuance

A useful tip that will help any business stay efficient in matters relating to finance is to keep a number of blank invoice templates on hand. Not only is keeping lots of blank invoice templates a big-time saver, but it will ensure that you’re able to send out invoices as soon as services provided to clients have been completed. It can also be a strong contributor to a consistent aesthetic for your business. There are hundreds of free invoice template Word options readily available online that you can customise to suit your business needs and brand identity.

You could also use a fake recipe generator to generate receipts for food, taxi, hotel, restaurants, tolls, gas/petrol, rental cars, and many more. 

Decide On A Bookkeeping System

At first, it will make sense to go as low budget as possible with your bookkeeping system, and perhaps even try doing the accounting for your business manually. Using a low-cost or simple bookkeeping system is not a problem as there are many different systems that are easy to use.

You’ll need to set up a chart of different accounts that require managing and you’ll need to decide which payment terms you want to use. This means that you’ll have to set up a way of receiving payments once orders are completed and income starts rolling in. These are crucial steps in setting up your initial accounting system.

Opt For Accounting Software

Once you have a good understanding of your system, and you feel it is ready to start working for your company you might want to invest in well-priced, effective bookkeeping software. There are many good bookkeeping applications that are excellent at tracking expenses, income, and other financial transactions. Using software like QuickBooks, Xero, Freshbooks or ScaleFactor will automate most of the hard accounting work and will just require you to input the necessary amounts and transactions.

Maintaining the financial side of your business isn’t difficult if you know how. A home accounting system is the answer for anyone with a small business or side hustle that needs to look after their money efficiently.