No-body starts a business to do the books!

It’s a job most business owners hate but if you understand the numbers in your business you stand more chance of making a success of it!

We asked Drive’s very own Number Ninja, Emma James MIAB to give us some basic tips to make business life easier.

Emma provides remote bookkeeping and accountancy services to freelancers and micro businesses.

This is a compilation of the live Q&A in the Ask the Expert hour.


What if you just don’t like numbers?

Ann Hawkins If people really, really hate dealing with numbers and can’t / won’t employ a bookkeeper, what’s the very minimum they should be doing Emma?

Emma James

– Keep all receipts

– Record all income

– Create a cashflow forecast, even if this is really basic, so you at least know when you might run out of money

And keep a record of things like mileage and how much time you spend working from home.

Emma James I know most business owners hate dealing with the bookkeeping side of things, but spending a little bit of time regularly keeping on top of things will make things so much less stressful in the long run. Don’t leave everything until it’s time to do your self assessment.
What are you using to run your business if you don’t know your numbers?

Getting started

Q. What is a good app/program for getting started with keeping track of business finances?

Emma James I think it depends on what you want/need. I’d always suggest starting with dedicated software straightaway rather than using Excel, as it just makes things so much easier. I think Xero works really well for most businesses, but if you’re a sole trader it would also be worth a look at Quickbooks Online for the self-employed. The main thing is to keep track of everything that goes through the business, so income and expenses. I personally encourage recording expenses on the go, using apps such as AutoEntry, ReceiptBank, or the Xero app, as you’re much more likely to record everything if you’re doing it as soon as you’ve handed over money!

Using cloud software such as Xero and Quickbooks means that you can put your bookkeeping at the heart of your business. Integrations with things like Capsule CRM, Zapier, POS apps mean that you’re essentially building up the big picture of your business.

What’s all the fuss about Xero?

Q. I hear a lot about Xero. What do you think?

Emma James I’m a big fan, it’s the only software I use. The main plus for me is how well it integrates with other software, such as AutoEntry, Zapier, Capsule, etc. The reporting templates are really good, and you can also edit these to make custom reports. They have a free 30 day trial, so I’d suggest having a play around.

Q. For the numpties (me), how easy is it to set up software like Xero? Is this something best done by a ninja?

Emma James It’s certainly possible to do yourself, particularly if you’re pretty savvy about your business and willing to do a bit of training (Xero’s training videos are great). But I’d normally suggest a session with someone like me as we know lots of little tips and tricks, and we can also help you to think through exactly what you want to get out of Xero so that you can get the information in there in the right format. You could just put all outgoings in the General Expenses category, but that’s not going to be that useful if you later want to know how much money you’ve spent on pens!

Q. Lots of software make claims that it’s easy to set up, you can do it yourself. But with accounts, it’s just not that simple. I mean WTF is a general ledger and a day book and all that stuff my decrepit father tried to explain to me. Experts know this stuff and they know where things need to be “filed”. Do you like doing the initial set up? Having someone like you to do the set up would make the world of difference to small businesses and their financial stress levels

Emma James I really enjoy the initial set-up, it suits my process-driven brain. If I’m also going to be working with them on a regular basis it’s also a really good way of getting a good insight into their business. I also enjoy integrating it with other things that will help them, for example Capsule so that they can see within their CRM who still owes them money.

If you already have information in something like Xero then you can normally generate a cash report that will show you how money flowed through the business in the last year, which you could use to help identify possible trends and so plan for these.

Oh, oh, Cashflow!

Emma James I really recommend using a cashflow forecast. Without one you don’t really know where your business stands. I wrote a blog about this a while ago…/why-everyone-needs-a…/

Ann Hawkins Great advice Emma. I know a lot of people who have made a success of their business who check their cash flow every day before they do anything else. It only takes a few minutes but can save a lot of hassle and nasty surprises! Is there a particular template you like use?

Emma James I prefer to tailor it to the business, but a pretty good starting point is the template on the Startup Loans website.…/

I use mine religiously. No decisions are made until they’ve been run past forecast!

Forecasting seems to be a real problem area for accounts software. I think this is because people are generally looking backwards, at least for things like VAT returns and statutory accounts for limited companies. But looking forward is really important as that’s the one thing you can change! There’s some really good software available that integrates really well with Xero (and I think Quickbooks and others too) for forecasting – Futrli and Spotlight are the main ones I’d suggest looking at.

Keeping receipts

Q. Am I ok to keep digital copies of receipts or do I need to keep the paper copies too?

Emma James Yes. HMRC have said that they will accept either hard or soft copies of documents. The key thing is to make sure you get a receipt in the first place, how you then keep that is entirely up to you. I personally store mine digitally (I do this for personal documents too) and then upload to Xero.ssentially building up the big picture of your business.

Q. Is having the digital receipt attached to the expense is sufficient? I also save a copy in GDrive. Am I doing overkill?

Emma James I do both because I like a belt and braces approach, but as long as you have a copy of the receipt you’re good. If you were ever to be investigated by HMRC they’d be looking to see if you had kept good records, they’re not overly bothered how you do this.

Claiming expenses

Emma James If you haven’t already, please please please please separate your personal and business expenses. Please.

Q. Do people try to claim for personal expenses on their tax return? 🙂

Emma James It’s often a case of not having a clue come the end of the year as to what the expense was! The majority of people who come to me with their tax return are actually not claiming enough, rather than too much, which isn’t ideal either!

Q. Great Advice Emma. This caused me a world of confusion in year one when I was sole trader. I kept using the wrong bank accounts, multiple bank accounts, yada yada yada. Then, the world got simple when I used just one bank account for all business stuff and a separate one for personal. And now it’s even more simple because the contactless cards mean I rarely use cash. Hoorah!!

What else does a bookkeeper do?

Emma James I’m slightly in the middle of a traditional bookkeeper and accountant. As well as the typical bookkeeping tasks of recording expenses, invoicing, chasing payments, payroll, etc. a lot of my time is spent helping people get the information they need to make decisions. So maintaining cashflow forecasts and budgeting. I also provide training on Xero, either because someone wants to be better informed to do their own bookkeeping or because they want the knowledge to work better with their bookkeeper/accountant.

Emma James I also do quite a lot of self assessment returns, which would typically fall under accountancy rather than bookkeeping, but I absolutely love these.

Q. I include myself in this: Why are we all doing something we find difficult, causes anxiety, takes us away from fee earning work and, if not done properly, receives a fine?

Emma James I think part of it is that it’s really personal letting someone look at how well your business is doing/not doing. But external help can identify problems/opportunities much quicker as they’re not so invested in it.

Bookkeeper or Accountant?

Ann Hawkins Just to finish off Emma – what’s the difference between a bookkeeper and an accountant (apart from the hourly rate!)

Emma James The lines are being blurred, but generally speaking a bookkeeper will do the more day-to-day stuff, so recording ins and outs, chasing late payments, VAT returns, and possibly payroll. An accountant will prepare the year end accounts, and help with tax planning.

If you’d like to ask Emma anything about bookkeeping or the tips mentioned in this post, you can get in touch at The Number Ninja