Good bookkeeping in your business

Good bookkeeping is essential for all businesses, especially when you are self-employed.

It plays a vital role in ensuring business progression, development and success.

If you fail to manage and maintain proper financial records it can have serious negative consequences for you and your business. So, no matter how confusing you find the world of finance, managing your accounts is an aspect of business you really can’t afford to ignore.

Not sure what bookkeeping actually means?

There is no need to feel embarrassed, you have come to the right place to find out! Bookkeeping simply means the process of keeping an exact record of the money that comes in and out of your business. This includes categorising your income and expenses, organising and maintaining your financial documents, e.g. invoices, receipts, bank statements etc.

So why is it so important?

 1. Ensuring that you are Compliant

Making sure you keep your books and accounts up to date with the latest legal regulations and changes is vital for all businesses. Failure to be complaint with the companies and tax legislation could result in costly consequences. This includes running a payroll under the PAYE modernisation scheme, VAT returns and tax returns. Good bookkeeping also ensures that your annual accounts can be produced and returned to the Companies Registration Office in a timely manner.

2. Simple business analysis

Good bookkeeping is important as it helps when analysing your business. How are you supposed to know how well your business is performing if you don’t have accurate and up to date bookkeeping records? Staying “in the know” with your accounts enables you to conduct effective business analysis whilst also highlighting any current or potential future problem areas which then can be improved. You can also understand your businesses strengths and really maximise them.

3. Tax obligation

By maintaining good bookkeeping you will save yourself a lot of unnecessary stress and anxiety when the time comes to complete your annual taxes. Under the current tax legislation, you must submit a tax return each year, which often leaves business owners frantically rifling through mountains of paperwork to try and find missing documents. Sound like you? It doesn’t have to be that way. Keeping on top of your accounts throughout the year ensures you won’t be scrambling through your desk drawers when that time of year rolls around again. As when effective bookkeeping is put into practice the process of calculating how much tax you need to pay is quick and easy. Should you fail to keep your tax records updated you could face serious repercussions.

4. Business planning

As a business owner I am sure you know how important planning for the future is. Detailed recording of accounts provides a clear overview which then makes planning for the future much easier, as business owners can budget and invest their money effectively. Hopefully, then resulting in business longevity.    

5. Reporting to investors made easy

Reporting about the financial status of your business can be nerve wracking enough, so don’t make life harder for yourself with unorganised records of accounts. With the main concerns of investors being centred around whether you have utilized their money effectively and whether the business is making any money, good bookkeeping makes the process of reporting on your accounts much easier.

Overall, good bookkeeping is not only essential for the successful running of your business but it provides clarity to you as a business owner on the position of your business. Easy access to your accurate financial information will reduce the stress and anxiety that often comes with being a small business owner.