Bookkeeping can be as simple or complicated as you choose to make it. There are all kinds of methods and systems, but at its heart it is simply a written record of financial transactions. A multinational corporation will have far more complex accounting needs than a sole trader running a small business from home.

Here are some tips to help keep small business bookkeeping easy and straightforward.

Knowing What Records to Keep

Make it your business to understand which (and what type of) records you need to keep. It is a legal requirement that business accounting records are kept for at least six years, so it’s vital to have a system and stick with it.

HMRC expects you to save:

  • Bank statements.
  • Paying in slips.
  • All receipts.
  • All purchase records.
  • All transactions including withdrawal of money from a business account for personal use.
  • A record of all sales or purchases of business assets.

If there’s any doubt about whether to keep a record or not, keep it. It’s better to err on the side of caution than to discard something you need later.

Getting Professional Help

Because bookkeeping is sometimes confusing to new business owners, getting professional advice is recommended. For those who want to master their own books, short courses in bookkeeping are invaluable. Ask at your local Chamber of Commerce as a starting point.

Otherwise, seek out the help of a professional bookkeeper to take care of daily tasks. A bookkeeper differs from an accountant in the role they play. Where as an accountant will delve into the numbers and pull out the relevant information to go in a tax return, or offer more in-depth business advice, a bookkeeper is the person who creates the documents the accountant will use.

Having books made up by a professional bookkeeper ensures they’re in the correct format, and contain all the necessary information an accountant will need. It can save time and money in accountancy fees when the books are in order at the end of the financial year.

As mentioned previously, small businesses have simpler needs than larger concerns, but knowing what you’re allowed to deduct for tax purposes (such as a percentage of your household fuel usage if you run your business from home) can be confusing. Professional bookkeeping help can ensure you’re claiming all you’re entitled to.

Keeping Business and Personal Finances Separate

Tempting though it might be to combine business and personal expenses, especially for startups, it’s never a wise thing to do. The common argument is that all the money belongs to the business owner anyway (if they’re a sole trader or freelancer), so why keep it in different accounts?

One reason is that separate accounts make life easier. HMRC doesn’t want to hear about household expenses so, when the tax return is filled in, business transactions need separating from personal ones anyway.

Another, arguably more important, reason is that keeping a separate bank account for business purposes shows the financial health of the business at a glance. It’s easier to see where money is being spent, where income is coming from, and where economies should be made.

Embracing the Cloud 

Online accounting and bookkeeping websites are plentiful, and can simplify the bookkeeping process. Most charge a monthly subscription fee, which is deductible as a business expense. Automatic syncing with a bank account allows daily updates of transaction information, so it’s quicker to track invoice payments, for instance, or make payments to your own creditors.

For beginners to bookkeeping, many also have comprehensive help and knowledge files which give some insight into how to organise various types of records.

The cloud has other uses in bookkeeping too. Even if you choose to use a manual system with physical books or an Excel spreadsheet on your local hard drive, there is a place for cloud technology. HMRC will accept some digital records in place of paper ones (such as receipts and some VAT documents). Documents that deal with tax should be kept in their original form.

The best advice is to keep bookkeeping as simple as possible. Include only what you need, and don’t be tempted to purchase complicated accounting packages if you don’t need them.

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