Bookkeeping

The importance of Bookkeeping 

Every business needs to maintain their records. Whether this is to help with preparing year-end accounts, preparing management accounts, or just maintaining records required by HMRC.  

In general, records must be kept for six years from the date of filing the tax return to which the documents relate.  

 Implementing a system that keeps your records in a logical, easy to use, easy to find manner will really help your business. The benefits of implementing a system are: 

  • Information required will be easily found. This means that if customers have queries about bills, you will be able to answer them quickly, thereby minimising disruption to your business. 
  • It will be much easier to prepare year-end and management accounts since all information will be to hand. The management accounts will help you see whether the business is performing well or not. 
  • If HMRC enquire into your business, you will be able to provide them with the information they need. If you cannot give them access to original copies of records such as expenses, penalties and interest may be charged. 
  • You will be able to compare renewal premiums for things such as insurance to last year, to see whether the increases in cost are reasonable. 

If you need help with bookkeeping, or any accountancy matters please contact us.  

Bookkeeping systems 

The type of bookkeeping system your business needs depends on many factors such as: 

– What type of industry you are in 

– How much income and expenditure you have in a year 

– Whether you are VAT registered 

– Whether you have any employees 

A fairly simple business is likely to be able to use very basic record keeping methods such as manual cash books, or an Excel spreadsheet.The benefits of this system are: 

– You do not have to pay for software, which can often be very expensive 

  • You do not need to learn how to use the software, which can often take a lot of time to learn. 
  • Contrary to what many people believe, accountancy software such as SAGE, Quickbooks or XERO does not necessarily make your books and records more accurate, or easier for your accountant to prepare your year-end accounts with. This is because many errors can occur due to not correctly recording income and expenditure, and these errors are often more difficult to identify and correct on these specialised software platforms. 

The negatives of using a simple bookkeeping system are: 

  • It can be more difficult to prepare regular management accounts. Using specialist software, if you want to see a profit and loss, or balance sheet, all you need to do is press a button, and it will be automatically generated. 
  • It can be difficult to maintain a list of people you owe money to, or people who owe money to you. 
  • Year-end accountancy fees are likely to be higher. 

A larger business is likely to find a bookkeeping system such as SAGE, Quickbooks or Xero useful for their business. The benefits of these are: 

  • They can help prepare VAT returns 
  • They can provide lists of trade debtors, and quickly produce supplier statements. 
  • They can help you manage your cash flow by identifying creditors which are due for payment, and debtors which are overdue. 
  • You can often store customer and supplier information such as contact details, notes of discussions, agreed discounts etc. 

If you need help with bookkeeping, or any accountancy matters please contact us.