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Bookkeeping involves recording all financial transactions of a business or an organization. The word bookkeeping is derived from traditional physical books used to record finances. This method is still used by some small businesses, while other use more convenient and time-saving digital books or software to record their finances. Whether you keep physical books or complex software, bookkeeping plays an important role in determining current status and predicting future aspects of a business.

Bookkeeping is often misunderstood with accounting which is an analysis of data recorded in the process of bookkeeping and shall be treated separately from bookkeeping.

Bookkeeping involves:

  • Making payment
  • Getting payments from customer or clients  
  • Ensuring the right amount of tax is paid 
  • Claiming possible tax reliefs 
  • Payroll management 

The financial transaction is usually recoded in three formats:

  • Cashbook – records the flow of cash in and out of a business.
  • Sale invoice – records what a business has sold, both paid and unpaid invoices are recorded.
  • Purchase invoice – what a business has purchased and for what amount. 

These are minimal formats you will need to manage in bookkeeping. 

The importance of bookkeeping

Bookkeeping is essential to every business without proper bookkeeping you cannot know where your business stands. You will have no idea about your yearly turnover, what you own and what you owe, and above all managing, your taxes will be impossible. Some important benefits of bookkeeping are:

  • Accurate budgeting
  • Meeting government rules and regulations
  • Easy to set targets
  • Easy to evaluate business progress
  • Make filing for tax easy
  • You know what’s happening in your business

Good bookkeeping practices

Keeping good bookkeeping practices only takes few extra minutes out of the day but saves you days’ worth of time and from the unnecessary burden on your finances. Here are some tips for good bookkeeping practices:

  • Creating separate personal and business books or accounts.
  • Using credit or debit card so every transaction is automatically recorded, in case you forget to record a transaction.
  • Keep a receipt of every transaction may help in clearing any confusion in financial data or making sure correct data was incorporated.
  • Use digital records so that you can update your financial data from anywhere and anytime.
  • If you are doing business overseas, keep a good eye on fluctuating foreign exchanges while recording the amount when it arrives in your bank accounts. It will save you from anomalies in your financial data.
  • Always keep your data UpToDate, and do your bookkeeping regularly. It will save you from financial stress.
  • Make a regular check on your saving for different future expenditures as paying for tax.
  • If you are unable to manage bookkeeping, hire a professional bookkeeper.

How can we help? 

The idea of hiring a bookkeeper or paying for professional bookkeeping services might seem quite extra to small businesses and entrepreneurs, while it might be considered as an unnecessary burden on the finances. However, bookkeeping requires plenty of time for its management and you can never be too sure whether your books are accurate. Keeping an efficient record is not only necessary for the success of your business but is also a legal duty. Failure to keep records may result in a fine of up to £3000 and disqualification as a company director. It is necessary to keep “true and fair” financial and accounting records for at least a year or in some cases longer according to the Companies Act. From growing companies, it can be quite difficult to focus on your business while managing extensive accounts and financial details. It is best not to overburden yourself with all responsibilities when you can hire efficient and inexpensive bookkeeping services.

Lyel Accountants offers you a wide range of bookkeeping services. With Lyel Accountants, you don’t have to worry about monitoring your business success, keeping track of suppliers, and determining which trade debtors to chase, because we do it all for you.

If you would like more information regarding this, get in touch with us on 0113 436 0002 or use the form below.