To learn the basics of bookkeeping, you must familiarise yourself with the methods available for keeping records. In addition to learning bookkeeping techniques, you’ll need to understand what the role of a bookkeeper entails and how important it is to keep your records organised.
If you’re a beginner in bookkeeping, read on to learn our top tips.
Where Should You Start?
The three most popular ways to keep track of your records are by using accounting books, spreadsheets or bookkeeping software. We’ve broken down each option to provide you with all the information you need to know.
If you’re after a simple way of keeping track of your accounts, an accounting book would be the best method to use. Although this process isn’t suited for everyone, using an accounting book when you’re bookkeeping is a reliable way to measure a business’s performance.
Ideal for small business owners to use, spreadsheets are a reliable, easy way to track accountancy records as well as being a fast solution if you’re wanting to get your business up and running.
Although spreadsheets are simple to use, human errors can easily be made. The bigger your business grows, the harder it could become to manage various spreadsheets.
In compliance with MTD (making tax digital) a bookkeeping app or desktop is required if you’re using bookkeeping software. This usually doesn’t apply to smaller businesses, as they can use free software due to having fewer accountancy records to keep on top of.
Bookkeeping vs Accounting: What’s the Difference?
Both bookkeeping and accounting share a multitude of similarities, they have the same long-term goal in mind to help your business thrive financially, even though their roles are distinct. It can be confusing to differentiate the two when you’re just getting started in bookkeeping.
Bookkeepers focus on keeping track and recording sales and purchases made by your business, as well as overseeing how much money goes in and out. A bookkeeper’s role includes recording financial records, producing invoices and posting credits to name a few.
An accountant has a similar role as a bookkeeper but ultimately has more say when it comes to helping business owners make financial decisions. Accountancy consists of generating reports and dealing with tax returns, income statements and insurance – meaning they look at the bigger picture, dealing with complicated tasks that can be time-consuming.
As you embark on your bookkeeping journey, you will benefit from having a firm understanding of basic bookkeeping terms and definitions. There is a lengthy list of terms and definitions, so we’ve compiled our top three phrases which we believe are widely used and should be understood by every bookkeeper.
Referring to the recording of financial transactions made by your business, accounts can be grouped into various categories such as revenue and expense. Accounts go into your ledger, which is later used to help create financial statements.
Used to break down the financial situation of your business, balance sheets include liabilities, assets and shareholder equity. Balance sheets are one of the three core financial statements that are used to evaluate a business, showing what a company owes and owns.
A bank reconciliation is a style of reporting that checks and explains differences between your business’s cash balance and bank statements – this also includes deposits and money withdrawals.
Put simply, bank reconciliation is the process of matching the balance of a bank account to the corresponding information from a bank statement.
Basic Tips to Remember
It’s important to remember a few key tips as you continue bookkeeping, regardless of your level of experience.
We recommend doing your research when it comes to keeping track of business finances, especially if you’re entry-level. Even if you don’t have much experience with bookkeeping, it’s important to maintain your knowledge throughout the entire process.
Using online tutorials and participating in learning programmes can help improve your bookkeeping skills. Regardless of whether a tutorial is free or not, online resources with information and tips can help you learn more efficiently.
Bookkeeping can be stress-free if you’re organised. Making sure the records are in order and up to date will be useful in the long run – the last thing you want is to clutter up pieces of disparate information.
Bookkeeping At LJS
Getting started with bookkeeping can be a difficult process, especially if you have no experience in financial matters. The most important thing for any business is to stay focused on its goals, which may be difficult if you’re responsible for bookkeeping.
At LJS, we understand that business owners don’t have the time to reconcile bank accounts and maintain various bookkeeping duties. Our team of professional bookkeepers can complete all required duties while following HMRC guidelines.