7 Mar 2023
So, your business venture is well and truly off the ground and you’re beginning to see an increase in transactions. While it’s important to keep the momentum going, you’ll also need to have a robust bookkeeping system in place. Let’s take a closer look at the ins and outs of bookkeeping, and explore how a combination of bookkeeping and accounting can help your business to thrive.
Bookkeeping is the act of accurately recording and tracking your organisation’s financial transactions. It enables you to understand how much your business earns and spends, and know how much money you have to work with.
Bookkeeping responsibilities include:
Keeping a record of financial transactions
Managing invoices and recording payments
Paying suppliers and keeping a record
Managing payroll if you employ people
Keeping a record of accounts receivable
Keeping a ledger (the main financial record-keeping system)
It’s a good idea to establish an effective and efficient bookkeeping system as soon as you can, and dedicate an hour a week – or a few minutes a day – to bookkeeping tasks. You might decide to manage your bookkeeping in-house or outsource it to a qualified professional. It’ll depend on your budget, preference and time constraints.
You should be able to access your bookkeeping platform remotely and with ease. Opt for a secure digital solution that allows you to store information in one place. Here are some of the financial aspects of your business you should keep a record of:
Your income and expenditure, including receipts
All payroll records
Other personal income for your self-assessment tax return
Any income you receive from grants
Rules around record keeping can differ depending on the structure of your business, i.e. whether you're registered as a sole trader, partnership or limited company. You can refer to HMRC’s guidance on running a limited company for more information.
In terms of how long to keep your records, the current rule is a minimum of five years after the end of the tax year. In other words, for records for the year ending April 5 2023, you’ll need to hold onto your records until at least January 31 2029.
Helps with budgeting – it’s much easier to achieve budget accuracy when your records are up-to-date (as opposed to relying on guesswork).
Helps you meet tax obligations – regular bookkeeping will empower you to prepare for your tax bill because you can better predict you might owe.
Helps you set goals – it’s easier to set realistic targets and track progress when you’re aware of how your business is faring financially month-to-month, or even week-to-week.
Helps with peace of mind –of course, being on top of your bookkeeping will provide you with peace of mind; something you can’t put a price on!
As a new business owner you might think that bookkeeping and accounting are one and the same – but they’re not. It can help to think of booking and accounting in terms of the professionals who specialise in them.
A bookkeeper is someone who keeps records of a business’ financial transactions, whereas an accountant is someone who analyses and reports on the findings, and they can help business owners make informed decisions.
Both bookkeeping and accounting are key when it comes to a business’ financial health, whether the business is a small enterprise or startup, or a large established corporation. Accountants can provide accounting and bookkeeping services.
Help you fill out tax forms
Help you reduce your tax bill
Help you plan your tax liability
Help with your business strategy
Help you make business decisions
Help you manage your cash flow
Help you identify any financial pain points
Help you manage any business debts
Help you pinpoint opportunities for funding
Funding Options helps UK firms access business finance, working directly with businesses and their trusted advisors – including accountants. If you or your accountant have identified an area of your business that could benefit from additional funding, you can use our platform to see how much you could be eligible for.Explore business finance
Check your eligibility using our online form without affecting your credit score.Get started
Sign up for the best of Funding Options sent straight to your inbox.