What is Bookkeeping and How it is Important for your Business?

define bookkeeping

With this, your business must do taxes digitally using software and applications. You must do your books and have a tool like https://www.vizaca.com/bookkeeping-for-startups-financial-planning-to-push-your-business/ Accounting Cloud to handle your taxes. Without bookkeeping, a company would not have a clear view of its financial health.

Your books should show details of all the money coming into and out of your business and split accordingly into sales revenue and expenditure. Due to this regular access and contact, following consultation with your accountant, it’s likely that your bookkeeper will also more effective in complying with HMRC’s new MTD requirements. You can be a licenced bookkeeper through ICB, Institute of Certified Bookkeepers as well.

Tips for hiring a bookkeeper for your business

In the case of accountants, they can also make some strategic recommendations for improvement. The single entry bookkeeping approach is generally used by smaller businesses and is often seen as the most straightforward bookkeeping for startups way to maintain HMRC compliant financial records. Keep your information up to date, and make sure you take time to review your financial reports (sometimes known as management accounts) regularly.

  • It will help you to know everything about bookkeeping and give a qualification boost.
  • Financial reporting is a wide subject, driven by the size and complexity of a business.
  • This method is only suitable for very small businesses or charities with very few transactions.
  • Additionally, it will give you a professional certification that can be used in the UK and internationally.
  • In addition, bookkeeping services can provide peace of mind and allow business owners to concentrate on running their businesses.

Anyone who is self-employed or a limited company director needs to file a Self Assessment tax return every year. This is used to declare your earnings from employment and other income to HMRC and calculate how much you’ll need to pay in National Insurance and Income Tax. In order to do this effectively, and for things like filing your return early (which has many benefits), your bookkeeping must be organised. Bookkeeping traditionally refers to the day-to-day upkeep of a business’s financial records. Bookkeepers used to simply gather and quality-check the information from which accounts were prepared.

Examples of bookkeeping tasks

This includes recording transactions such as sales, purchases, payments, and receipts in a set of books or a general ledger. Once bookkeeping is completed, the records are passed on to the accountants to prepare financial accounts and file financial reports to HMRC and other agencies for tax returns and VAT. The basic way to record financial transactions is known as single-entry bookkeeping, while double-entry bookkeeping is more complex and sophisticated. Company ledgers can be anything from a sheet of paper to a specialised bookkeeping and accounting software like Countingup. Using accounting software to track your financial data is often more efficient since it stores your data in the cloud, meaning you can access it from anywhere.

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