Accounting basics that every small business needs to get right

You love being in business, right? Let’s keep it that way. Healthy accounting and bookkeeping habits will help things run smoothly. You’ll be able to see how finances are going – and make tax season much less of a stress. The team at Xero accounting software explain what you need to keep an eye on, and why.

A lot of accounting is about good habits. Record transactions to your books regularly - it’s one of those jobs where playing catch-up is no fun! Staying current also helps you avoid nasty surprises, like learning too late that you’re about to run out of money.

The good news is that technology now makes this much easier, and you can use lots of online tools to help make accounting easier. For example, you can set things up so transactions from your Monzo Business account automatically sync to your business books in Xero every day. No data entry required. 

Learn more about connecting your Monzo Business account to an accounting tool.

You need a balance between the money coming into your business, and the money going out. Keep track of what you’re owed and make sure you follow up on late payments – because there might be a lot of those!

Do the same with bills. Be aware of what’s due, and when. Use this information to predict what your cash levels will look like in the weeks ahead.

And with a Monzo Business account, you’ll see your upcoming Direct Debits and standing orders before they’re due, so you’ll always know how much you’ll need and when.

For income tax, keep your books up to date through the year so tax time isn’t a mad scramble. And keep a record of your receipts. You can attach photos of receipts to each transaction with a Monzo Business account, straight in the app. No more old shoeboxes!

Keep regular tabs of your VAT position and set aside what you owe. That way you won’t be tempted to spend it! Learn how to figure out your VAT position in Xero’s quick guide.

With Monzo Business Pro (£5 a month), you can save for taxes stress-free. Just tell us how much you want to save, and we’ll automatically put it away in a Tax Pot each time you’re paid.

Bookkeepers and accountants can help with this stuff. They’re not just tax people - they can catch up your books, fix your invoicing and help you get finance. They can even work on your business plan. There are some pretty cool advisors out there - try to find someone with experience working with businesses like yours. And find a personality fit, too. That’s really important. You can search for tech-savvy local accountants on the Xero advisor directory.

This is the second in a 3-blog series on small business accounting. Our first blogpost covered what accounting startups should be thinking about in their first few weeks. And the next instalment talks about how accounting can actually work for your business - stay tuned!

With Monzo Business Pro for £5 a month, you can connect directly to Xero and see all your spending and income in one place.

And if you're new to Xero, you can get your first 6 months of Xero free (worth up to £180). Terms apply.

Or if you just need the essentials taken care of, you can get a Business Lite account for free. Tap above to learn more!