Where to start with small business accounting

To many people this is the same thing, but they do have different meanings and here's why... 

 

Bookkeeping is the process of recording monies in and out of the business. It involves recording and storing all the financial information, such as receipts, invoices and bank transactions. 

 

Accounting is the process taken to help interpret the financial data of the business enabling you to understand the financial staus and performance. 

 

BOTH of these are equally important in your business and it's vital to get the bookkeeping correct otherwise the accounting is meaningless. Whatever the status of your business, whether you are a sole trader, limited company or freelancer, you are legally required to perform certain bookkeeping tasks to remain compliant. Staying consistent is the key to successful bookkeeping. Here are the main tasks you need to do (as a minimum). 

 

Every day you should record your transactions in and out of the business. This allows you to keep track of income and your debtors as well as your expenses. It is imperative that you regularly check your turnover to ensure you are working within the right thresholds and to see whether you should be registering for certain taxes, such as VAT. All the financial data you record will be necessary to produce your tax return and accounts. It is also a requirement that these records are retained for six years. 

 

Back up your data on a daily basis if possible. If you use digital software this is usually held in the cloud, but it is still advisable to store a backup offsite should you have any IT issues, system failures or worse! We can advise on people to help you with this. 

 

Bank reconciliations should be carried out weekly as a minimum. If you are using bank feeds always check against your bank statement on a monthly basis to ensure they balance. Bank feeds do not always work! Carrying out your bank reconciliation regularly will help you to see how your business is doing but also if there have been any anomolies such as double payments. 

 

VAT returns generally have to be filed on a quarterley basis. To provide accurate figures to HMRC, your bookkeeping must be fully reconciled and checked. 

 

Tax Returns are currently filed on an annual basis, but this is soon to move to MTD and will have to be completed on a quarterley basis. It will be essential that small business owners are keeping accurate records and ensuring it is up-to-date. 

 

Debtors can be a real issue for small business owners as it has such a major impact on cashflow. Keep chasing invoices on a regular basis as a preventative measure and send out reminders. 

As a business owner your time is valuable. Although you maybe able to deal with some of the bookkeeping it's beneficial yo use an expert to interpret the data and to produce cashflows and reporting. Having a handle on your finances will help you in making decisions about your business as well as making you feel empowered.  

 

If you need help in your business, please drop us a message.