Bookkeeping is important for a business. As a business owner, you can choose to do the bookkeeping yourself or invest the money in a professional accountant to take care of your bookkeeping.
It might be more achievable to do the bookkeeping yourself if you are a small business. The larger you get, the more complicated and time-consuming it will be for you.
In this article, we will be going over basic bookkeeping tips, so you will be prepared for bookkeeping, allowing you to decide how to best manage the bookkeeping tasks.
What Is Bookkeeping?
Bookkeeping is the process of recording financial business transactions. These transitions are put into organised accounts daily to keep accurate track of a business’s incomings and outgoings.
Bookkeeping is part of the accounting process and is a vital part of a business. It will show that a business’s finances make sense and will accurately record purchases of a business as well as the money that comes in.
What Does a Bookkeeper Do?
It will be your bookkeeper’s job to provide accurate and up-to-date information on a business’s finances. Their job involves preparing the source for all transactions and operations.
The reports will often go to business owners and managers to help them make decisions.
The Difference Between Bookkeeping and Accounting
Bookkeeping is a vital part of the accounting process for any business. The two terms ‘accounting’ and ‘bookkeeping’ are often confused or used interchangeably, however, they are not the same thing.
Bookkeeping is the process of recording financial transactions and reporting on the information, whereas accounting uses the data to establish a business’s financial position. Accounting also manages decisions about a business’s finances and analyses its data for an effective financial strategy.
Basic Bookkeeping Tips for Your Business
Take note of some of the basic bookkeeping tips that your business should always follow.
You should keep records of every payment. This is the basic bookkeeping task: making it clear when exactly payments were made and when they were received. It makes it a lot easier and quicker in the long run to find specific payments, whether they are in or out of the business, later down the line.
Choose Your Method
Choose your method and bookkeeping software. Traditional bookkeeping includes recording income and expenses on the day of the invoice, while cash accounting and bookkeeping record the expenses on the day you actually receive payment.
Cash accounting will help you reduce the risk of having to pay tax on money that you have not yet received. This type of bookkeeping is only available to businesses that turnover £83,000 or less, so bear this in mind.
You must be strict with your deadlines. Late payments will incur penalties, and this is something that you will want to avoid as a business at all costs, especially with HMRC.
If any clients continuously make late payments to you, you should consider not working with them if they continue to let you down. Managing your business’ finances in this way is called credit control, and being on top of this is what will keep your cash flow healthy.
File Things in Order
Everything should be in order when you file them. This includes financial statements and invoices. Doing this and keeping it this way will save you or your bookkeeper time.
If you are paying a bookkeeper to manage your documents, you will be paying for their time in organising and sorting these things if they are not in order.
You can claim back a lot of your expenses as business expenses, which will reduce your overhead.
Make sure you keep your receipts and store them somewhere safe so you can accurately keep track of your expenses in order to claim them back.
Business and personal expenses should be kept separately, so you can identify which ones can be claimed in order to reduce your overall tax bill.
Know When to Outsource
Bookkeeping is time-consuming, even if your business starts small, it will still take up a chunk of your time. It can, however, be manageable if you are small, but be realistic with yourself as to when you need to outsource your bookkeeping duties.
Having an outsourced bookkeeping service may be an investment, but it will save you a lot of time and, therefore, money, making it a worthwhile investment for your business.
LJS Accounting Services
LJS Accounting Services has a wealth of experience and knowledge in all areas of accounting for businesses.
For bookkeeping, we offer a fully computerised system that includes bespoke monthly management whenever you need it. We ensure all bookkeeping is up to date and HMRC is well informed, taking the stress and hassle from you so you can concentrate on running your business.
Contact us today if you wish to find out more about what we can offer you. Our Liverpool office can be reached at 0151 601 0000, where our team looks forward to hearing from you.