Bookkeeping: The Basics

Good record keeping is at the foundation of building a successful business. Nice clear records can help you manage your business effectively and make positive that you comply with all tax requirements.

Keeping record of your businesses financial transactions is often known as bookkeeping.

  It can provide proof to build a clear picture of income, outgoings, and ultimately the financial stability of your business.
  It can let you recognise and deal with funds flow issues early on.
  It can provide proof to demonstrate the financial feasibility of your business to potential lenders or investors.

Why is bookkeeping so important?

You will require to keep detailed financial records for the purposes of filling out tax returns or to make tax claims, these records will require to be kept for a considerable number of years, and if improperly maintained you could face penalties.



Who keeps the books?

You can either maintain records yourself, hire a bookkeeper, or pass on bookkeeping duties on to your accountant. Choosing the right option for your business will be contingent on the size and complexity of your business, as well as the amount of time you are willing to spend on the method of keeping records.

Usually speaking, the fewer individuals who are involved in keeping your books the fewer errors there's likely to be, and errors can sometimes cost money.

What information is necessary?

The level of bookkeeping will vary from business to business, so you may need to seek professional advice from an accountant to make sure you do not miss any vital parts of correct bookkeeping. However you will need to keep a record of:

  Receipts and invoices, including VAT receipts in the event you are VAT registered.
  Business expenses.
  Business income and outgoings, recorded separately, including the details of each transaction.
  In the event you are an employer you will need to retain P.A.Y.E records for at least years.

Bookkeeping records can be kept on paper, with the aid of computer program, or even using online program, but whatever option you pick to utilise you ought to always make sure that you have an electronic and/or paper backup kept separately to keep away from catastrophe.

If you fail to keep your records up-to-date you could face penalties in case you are unable to back up any statement that you make in your tax returns. Correct and relevant financial records, updated regularly and clearly can save you funds and time in the long run. A qualified chartered accountant or professional bookkeeper can help advise you on the best bookkeeping option for your requirements.