Is bookkeeping at the top of your to do list? Nope, didn’t think so. And you’re not alone. There are many busy parents who run their household finances on a wing and a prayer.
Maybe it’s because bookkeeping and accounting sound like very ‘business’ things to do, or maybe it’s because it seems like a lot of complicated work.
It doesn’t have to be either complicated or hard work, and it’s definitely not just something businesses need to get involved with.
Why Bookkeeping Matters
There’s huge temptation to spend or overspend, with ‘easy monthly payments’, and ‘buy now pay next year’ offers all around us. Once in a while, it’s okay taking advantage of special offers, but only if you know exactly what your financial big picture is and are sure it won’t cause trouble down the line.
Often, it’s the little things can make the biggest holes in bank accounts. Those small product insurance payments, the odd online purchase, coffee with friends several times a month… the list is almost endless and the amounts spent can be quite eye-opening when you add them up. Consider, for instance, that even a modest coffee during your lunch break each day can run up a bill of at least £40 per month.
Developing a bookkeeping habit shows you just where you’re spending money. It can help you foresee potential pitfalls round the corner, and then take action to avoid them.
A Very Simple System
Forget payroll, VAT, tax and all the other things the word ‘bookkeeping’ often conjures up. Unless your family finances are complicated (in which case you may need an accountant to help you keep your affairs straight) all you need is a way to track income and outgoings and check off transactions against your bank statement.
You can do that in a notebook, or in Excel if you like working with computers. In either system, you can get away with two columns to start with:
One for everything you spend money on
One for everything you earn
As time goes on, you could add in more columns to differentiate between different kinds of spending. You could have a column for cash purchases, another for direct debits and a third for card payments.
If tracking spending and earning is new to you, keeping it as simple as possible is the best idea. Include every penny you spend, even items under a pound. They all add up.
Every month, add up your spending and balance it against your income.
When a Very Simple System Isn’t Enough
If you’re self employed, have income from sources other than from paid employment or you have investments or receive dividends, the simple system is still good for personal daily spending, but it won’t help with filing a tax return or claiming allowances and making sure you’re not paying too much tax.
Professional bookkeepers will work with you on a part time basis if you don’t need full time help. They’ll also advise on what you need to do and how to prepare books for your accountant.
If you file a tax return, an accountant will take your well-kept annual books and dig into them for the information needed to file an accurate return to HMRC. They’ll make sure you’re claiming all you can, and keep your tax bill to the minimum. In this respect they can often save you more than they’ll charge.
Keeping up-to-date books will also keep bills down, since it cuts down on the amount of time your accountant needs.
Bookkeeping can be quite addictive. There’s something very encouraging about knowing exactly what your money is up to, and something equally rewarding about achieving a saving each month. And if you set up a very simple system to get started, it won’t take much time out of a busy parent’s life.