When starting up, many business owners wear all the hats, especially small sole traders like makers and artisans tend to be. This includes doing your own bookkeeping. So that you can get a handle on your week, you might like to know how long to set aside to do your books.
Unfortunately, there isn’t a straightforward answer to this one; as with so many things in business, it depends on your circumstances. It will take you some time to set it up, and then as time goes by, it will take you longer the more busy you get (the more transactions you have). The good news is that as you get the hang of doing it, you’ll be able to do each transaction more quickly. Watch my video on this topic, or read on below.
There are five main considerations when working out how long it might take you to do your books:
- Number of transactions
- How often you catch up your books
- How much you’re able to automate
- Any extra reporting you need to do by hand, which your software cannot provide you
I believe it took me about 3 solid days to set my cloud accountancy software up to begin with. That included time to research some options, choose one, open the account, set up the categories that I needed (your software will call the list of expense/sales categories a “chart of accounts”), input my customers’ and suppliers’ information, read/watch tutorials to get a handle on how to use the software, and input about 9 months’ worth of accounts (I’d used Excel at the beginning).
This will vary for you. Perhaps you’ll need more time to choose a software and come to terms with it; perhaps you’ve seen enough adverts for one of the big players that you’ve already made your mind up and are ready to dive in. Perhaps you are more decisive than me and will decide in about thirty minutes; perhaps you want to use the free trial on 2 or 3 different brands of cloud accountancy software to see which works best in your head. Adjust accordingly.
Perhaps you’re starting on software right at the beginning of your business, with no need to enter past months’ transactions. Perhaps you have more months to enter.
Perhaps you’ll need more time to watch or read tutorials and search help articles to get a handle on how to use the software; perhaps you’ll need less.
The easiest thing, I think, is to set aside one or two half-days per week to do whatever research and setting up you need, until it is finished.
Number of Transactions
Once you’re all set up, for your regular bookkeeping, the biggest influencer of how long it will take you is the number of transactions you make each month. Look at your bank statement and count all transactions in and out. Add any transactions that were made out of other accounts (if you paid in cash, or with your personal card, but it’s a business expense, it still needs to go through your business accounts).
Many qualified bookkeepers will think in terms of 1 minute per transaction, but you’ll need to allow yourself more time because it’s new, and because you’re likely going to have to look up some as you go. You’ll quite likely have to search HMRC’s website several times a week when you’re starting to find out if different items are business expenses for you. If you’re VAT-registered, you may need to check the VAT treatment of different items as you’re entering them. You’ll also be deciding for the first time things that experienced bookkeepers will have already come across and decided ages ago. And you’re still getting a handle on how to use the software you’ve chosen.
All in all, at the very beginning, I’d suggest thinking in terms of 3-5 minutes per transaction. That will come down as you do more of it. If at first you have 20 transactions a month, then this first step comes to 100 minutes, or an hour and forty minutes.
How often are you going to catch up your accounts? If you don’t know, go read my first post in this series to think through what’s right for you.
Once you have, if you think you should do it twice a month, than your 100 minutes becomes 50 minutes a session.
How much of your bookkeeping can you automate? After you set it up and get the hang of it, automation will decrease your time per transaction.
The first automation you’ll want to set up is a bank feed, which the vast majority of accountancy software will use. This means that your bank sends your bank statement, day by day, into your accountancy software. Instead of you having to enter it manually, or log in to your bank, download a statement, and then upload it to your accountancy software, it’s just there. In the UK they’re pretty reliable. When you choose your accountancy software, make sure it supports bank feeds from your bank.
After that, one of the most common types of automation in bookkeeping is using artificial intelligence to read what it can off your receipts to save you from some typing. Once the AI has read the receipt, you are just left to proofread what it shows, and add any missing information. It’s not usually a great deal of time saving per receipt, but when you have many receipts, shaving a minute off each one will really add up.
If you give customers credit, then depending on the software you’ve chosen, you can automate chasing people for payment, though this does depend on you reconciling the payments received promptly. That just means making sure the payments you’ve received are matched to the invoices you’ve sent out.
There are a number of other kinds of automation you can arrange. If you manage to halve your time per transaction by automating what you can, then your 50 minutes per session has now reduced to 25 minutes.
Depending on how complex your business is, you may find that even the most fully featured cloud accountancy software can’t produce the reports that you need to work out the answers to the questions you have. For example, “Was last weekend’s market profitable?” or “How profitable is this platform versus that platform?” Most software should be able to handle this through built in tracking mechanisms, or through add ons. It’s called different things in different software: Tracking categories; Tags; Cost Centres; Class Tracking; Analysis Codes; etc. If this suits your needs, then you’ll be able to pull reports directly from the software that will answer those questions for you.
If your particular situation is too complex for these, however, or if you run into limits to the tracking mechanism, you may find you need to keep a separate spreadsheet to work out the answers you need. If that happens, you’ll end up needing to enter most of your transactions twice: once in your accounts (Xero, Quickbooks, Wave, etc), and once more in your spreadsheet. You won’t need to enter all of them: none of your overheads such as rent would factor into working out a given market’s profitability. You also won’t need to enter the same level of detail in your spreadsheet.
As a guide to get you started, I’d suggest you’ll need to re-enter about three-fourths of your transactions into a spreadsheet for profitability analysis, and that each should probably take you about half the time. So your 25 minutes twice a month would then become about 45 minutes each.
I hope this helps you frame how to think through how long it might take you to do your accounts. I do think it’s a good idea to do what you can at the beginning of your business, so that you get a good handle on what’s involved, how your business works, and what to look for when you get ready to outsource them. I also think that bookkeeping is the first thing you should outsource, though I might be partial. It can quickly become very time consuming, so outsourcing this can be the easiest way to free up time for more making or marketing. You can also quickly get into the trickier situations where it pays to have a qualified professional to ask whether something is an allowable business expense, or how to best do something from a tax relief point of view (there are many intricacies to tax relief, and that’s not what you’ve gone into business to specialise in).