By definition, bookkeeping is the organisation of financial information and is vital to keep up to date to help with business analysis and cashflow management.
If you are a limited company Director one of your roles is to ensure that at a touch of a button you can see if a company is trading insolvent and what the tax position is. Ok Sole-Traders don’t ‘have’ to do bookwork but how do you know if your venture if profitable if you don’t?! Good record keeping allows you to make informed decisions about the future of your business.
So it doesn’t matter whether you are a handyman working as a sole trader, a small company selling products or a vast multinational, a clear detailed log of your financial history is recommended.
When starting a business or when the bookkeeping becomes more complicated for example you become VAT registered, make an appointment with a reputable accountant in your area and they will talk you through the bookkeeping process. Some may offer training, bookkeeping services or checking services (to provide peace of mind before you click submit to HMRC).
Of course the most cost-effective and quickest way of maintaining your books will be by doing it yourself, or is it? How long will it take you to do? Could it be more cost effective and less stressful to let a professional do the work – probably quicker and without errors – and you get on and do what you do best, running your business?
However, if you decide to do the bookkeeping yourself, make sure your default diary has time every week to do the bookkeeping – don’t leave it until the last minute – that is when it piles up and that job you didn’t want to do in the first place becomes even more terrifying!
And don’t make your bookkeeping more complicated than it needs to be, if you don’t have to submit VAT returns you can still use a manual or Excel based cashbook. But if you do need to or want to go onto cloud based software the three main contenders are Sage, Quickbooks and Xero.
- Record your income first, then costs, then cash, then your personal expenses.
- Keep receipts in a folder (either electronic or paper) in either A-Z or Date Order
- Keep each year separate
If you are investigated you can then find information quickly and shows HMRC you are organised.
Chose a software that meets the legal requirements, but allows you to complete the work easily, with understanding and gives you the information you need to run your business efficiently.
Bookkeeping Software has to meet regulations whether this is Making Tax Digital Vat Reporting or Recording income and expenses correctly – but it has to be right for YOU as well.
There are numerous packages out there and its important you do your research to chose the right one. From the main contenders and from experience of using all three we recommend Xero as it is more user friendly and seems to be forward thinking and future proofed, meeting the changes in regulations.
Xero is a secure online software. Your accountant can view the work at the same time as you, they can provide advice and make changes where necessary. The software has bank feed option for speed and availability of information, which is regularly up to date. They have some super online training videos too.
Software should speed up your processes. You will be able to create professional looking invoices, which can be sent to your clients online. You will be able to see who you owe money to, when it is due, and of course who owes you.
Software also improves accuracy over manual based cashbooks. All your financial information is stored in one place and it calculates the figures for you from Profit & Loss to Balance Sheets to Debtors (clients who owe you) to Creditors (suppliers you owe). And of course if you are VAT registered it prepares the reports and submissions to HMRC.
But do remember software is only as good as the user. User error can mean data, if entered incorrectly, becomes invalid or incorrect – so its important to get training to help you.