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Whether you’re a small start-up, established family business, freelancer or growing business, managing your finances, and implementing good bookkeeping practices are both essential for success.
Because bookkeeping is more than just keeping track of numbers – it’s about ensuring the financial health of your business and supporting your growth.
In this guide, we’ll break down what bookkeeping is, what bookkeepers do, and why this essential practice is the backbone of every successful business.
What is bookkeeping?
In simple terms, bookkeeping is the process of recording and organising all your business’s financial transactions. With everything from purchases and sales to payments and receipts included. Essentially, it’s the backbone of accounting – as without proper bookkeeping, accounting doesn’t have the information needed to generate accurate financial reports.
The term ‘double entry bookkeeping’ is used to describe the common practice of every transaction having two entries – a debit and a credit – allowing for a clearer picture of your finances. Basic or single entry bookkeeping only enters a transaction once which – depending on the type of business you run – can make it harder to keep track of accurate finances in real-time.
What does a bookkeeper do?
Whether you take on the role of bookkeeping yourself, or outsource this to a specialist, the bookkeeper’s role is to maintain accurate financial records through various tasks such as:
- Recording transactions: Anything from logging sales and expenses to recording receipts and payments.
- Managing accounts receivable: Making sure invoices are sent out and payments are received on time.
- Preparing financial statements: Bookkeepers create the basic reports that give a snapshot of a company’s financial health, including a balance sheet and profit and loss account.
These accurate financial records are essential for tax filing, managing cash flow, and making informed decisions, keeping financial operations running smoothly.
The role of a bookkeeper in the UK
In the UK, bookkeepers have additional responsibilities due to specific regulations and tax laws. One key aspect of bookkeeping in the UK is the preparation of VAT returns.
VAT registered businesses in the UK must comply with VAT (Value Added Tax) rules, and bookkeepers are tasked with ensuring that VAT is correctly applied to transactions and reported to HMRC. Additionally, UK bookkeepers must ensure compliance with tax laws, which include accurately calculating and reporting income and expenditure for self-assessment.
The role of a bookkeeper is also essential in helping businesses navigate financial regulations. From understanding the latest updates on tax laws to helping with payroll and pension schemes, bookkeepers in the UK have a wide range of duties to ensure compliance.
How to do your bookkeeping?
If you’re a small company, bookkeeping might seem like a daunting task, but it doesn’t have to be. This step-by-step guide will help get you started:
- Choose a method: For most businesses, digital tools are much easier and more efficient than manual logging. Systems like Xero, Quickbooks and Dext Solo simplify the process and automate tasks like invoicing, logging expenses, and generating reports.
- Track your transactions: Record every transaction in your chosen system, whether it’s a sale, an expense, or a payment.
- Reconcile regularly: Plan in time every week to check your records and make sure everything matches your bank statements.
- Generate financial reports: Use your records to create profit-and-loss statements and balance sheets to understand your financial position.
The importance of bookkeeping for business owners
Good bookkeeping goes way beyond just keeping accurate financial records.
Not only will it help you to make informed decisions about investments, cost-cutting or growth strategies. It also helps identify financial trends, such as cash flow problems, so you can fix things before they become bigger issues. And, by maintaining up-to-date records, bookkeeping ensures that you’re always prepared for tax reporting, helping you to avoid penalties for late or incorrect filing.
Are bookkeepers still needed?
With all the advanced accounting and bookkeeping software now available, you’d be forgiven for wondering whether a ‘real life’ bookkeeper is still necessary?
And the short answer is yes. Because whilst software can handle many aspects of bookkeeping, it still requires expert human oversight. Skilled bookkeepers will make sure the software is used correctly, they’ll interpret the sometimes complex financial data, and they’ll provide the insight needed to help you make strategic decisions.
On top of all that they’ll help to ensure compliance with tax laws, handle payroll, and manage more nuanced financial issues that software alone can’t solve.
In summary
Accurate bookkeeping is arguably the unsung hero of every successful business, helping you to stay in control of your business’s future by reducing stress and overwhelm and allowing you to focus on business growth.
At Scrutton Bland we’re here to support you every step of the way with your business finances, and professional bookkeeping is just one of the ways we can help. For more information on outsourced bookkeeping services for your business call us on 0330 058 6559 or email hello@scruttonbland.co.uk
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