For many small business owners starting out, the idea of keeping business records can be daunting. But basic bookkeeping needn't be a headache. With some organisations, staying on top of your business income and expenditure will help you stay in control of your finances. 

Why is bookkeeping important?

Bookkeeping involves the organised processing and storing of your business records. It is important to ensure that you are up-to-date with the financial affairs of your business. 

Having adequate bookkeeping systems in place will help you:

  • know when to pay suppliers and when payment is due
  • allow you to keep track of customers that owe you money
  • process sales invoice documentation
  • review the cash flow of the business
  • prepare profit and loss accounts and balance sheets
  • prepare reports
  • forecast and set projections for the future.

As a business owner you are required to keep and store accounting records for a minimum of six years. 

Do I need to use a professional bookkeeper?

Many small businesses use accountants to do their bookkeeping.

This will involve you passing over all of your books and records to the bookkeeper who will then process the documentation for you. Most bookkeepers are happy to come to your offices and do the bookkeeping on your premises. 

Other business owners will do their bookkeeping themselves or ask a family member to do it. This will involve:

  • Preparing quotes and sales invoices
  • Processing sales and purchase invoices
  • Preparing VAT returns
  • Processing other expenses
  • Bank reconciliations (making sure that all items have been recorded)
  • Petty cash reconciliations
  • Chasing debt
  • Paying suppliers (with appropriate documentation e.g remittance advice)
  • Recording customer payments
  • Dealing with wages.

Some business owners are confident to carry out all of the above tasks themselves - which will obviously same them a lot of money - but does take up a lot of time. Others may carry out some of the tasks themselves but then use a professional for some services such as Payroll or VAT.

If you decide to take on the work yourself, it is vital that you stay on top of your bookkeeping. To find an accountant or bookkeeper to help with your bookkeeping click here.

Does software help?

Software can definitely help. There are a wide range of software providers available, offering various services and tools from the basic to the more complex. 

Some of the features accounting software can offer are:

  • Basic accounting tasks - recording income and expenditure, financial reports and budgets 
  • Automation - preparing invoices and purchase orders, setting up automatic billing, processing single and recurring payments, bank reconciliation
  • Tax preparation - Online completing and filing of tax returns 
  • Inventory - Control stock levels, track sales and purchases
  • Payroll processing - timesheets, salary calculations, payslips, submissions to HMRC.

Here are two examples of accounting software to give you an idea of what's available on the market:

By entering ‘accounting software’ into a search engine will bring up a wide range of options available. 

Checklist: What information do I need?

To carry out your bookkeeping duties, you will need the following. Login to save this checklist to your profile for future use - as you work through the list, any checkboxes that are ticked or unticked will be automatically saved to your profile. (To register to join and enjoy the benefits of membership click on the link at the top right of the page. It will only take a few minutes to create your profile).

How often do I need to keep it up to date?

As often as possible. The longer you leave it, the bigger an administration burden it is.

It is a good idea to get into the habit of writing up your books on a weekly basis.

If you are using a professional to do your bookkeeping for you, then the frequency will depend on the size of your business and the volume of transactions. If you are VAT registered and doing VAT returns, then the frequency of your VAT return periods will usually govern the frequency of bookkeeping i.e. you will prepare your VAT returns whilst processing all of the relevant books and records.

Interactive tutorial: Understanding bookkeeping

Informi

Here we look at the fundamentals of double-entry bookkeeping. Click on the Start button below to find out more. 

Next Steps

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This page gives you some practical advice to help you forecast cash flows and options for improving your cash position.

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