Any successful businessperson will tell you that good bookkeeping is the bread and butter of any business. It basically involves keeping an up to date record of all of income and expenses and therefore the business’s financial position, enabling the owner to make educated decisions regarding the future of the company.
Bookkeeping is also necessary for a business to comply with a number of regular legal and tax obligations – from filing of accounts and VAT returns to corporation tax – all of which have to be filed accurately and on time with HMRC or Companies House.
As a business owner, it’s necessary to keep track of all aspects of the business; including trends in sales and profit, costs incurred, how much you can afford to pay yourself, amounts owed, taxes due and whether there are financial problems ahead.
Without records, it would be difficult to make decisions, know what’s working and what isn’t, plan for the future or decide on any potential investments. If the income and expenditure of the business were not recorded, there would be no control – something that would make basic management impossible.
Bookkeeping – The Traditional Way
The traditional way of bookkeeping involves doing everything manually. This includes paper records, spreadsheets, or using an accounting system to record transactions. However, even when these records are painstakingly and immaculately kept up to date, unless the business has an in-house finance function, they periodically need to be collated and sent to your accountant.
When the accountant receives all the basic data, the records will be processed and it then takes some time to produce management reports that can actually be used to evaluate the business and for decision making. These reports also set out the business’s financial position in a specific format that is often required by external parties. The accountant would also have to use this information to complete VAT returns, company tax returns, and annual accounts – AKA your tax compliance burden.
Realistically, you have two options: you could do the bookkeeping yourself, or you can pay someone else to do it. Either way, there is normally a significant delay between the collating the bookkeeping and getting back any meaningful information on the business – management accounts or your tax liability calculated. In addition, you will have to pay for these extra management reports and tax returns.
Let’s look at the facts – stats released last year by the Federation for Small Business:
• Half the owners of the UK’s smallest businesses spend up to eight hours per month on tax admin and one in five said a lack of understanding about the tax system has led them to miss tax deadlines.
• For 11% tax admin takes an astonishing six days per month.
• Two thirds of owners estimate the cost of dealing with tax obligations at over £3,500 pa.
• One in three said a lack of cashflow planning led to not paying taxes on time.
The 21st Century – the end to bookkeeping as we know it?
Looking at the stats, it’s obvious that doing things manually just isn’t working very well. The solution is clear – just get digital! All of the data is already there in electronic form and can be easily shared by using a modern, online accounting service.
This means that all sales invoices can be automatically recorded in your accounts and online business bank account statements can be uploaded directly into your secure records, meaning there’s no re-keying to keep your books up to date. – Or you can quickly enter everything via your phone.
Furthermore, the online system automatically takes this data and provides management reports from it – so you always have 24/7 access to an instant real time picture of your business’s position and tax owed. Your accountant always has access to the data and can use it to complete the necessary tax returns and accounts, without chasing you for the info. This way, a deadline is never missed and you are always safe from paying penalties.
By using an online accounting service, the accountancy and tax advice you need is included as well – you’ll have easy access to a named single point of contact, a real person, for unlimited advice and support. There are no surprise bills, commitments or exit fees, and for a competitive, transparent, fixed monthly fee you get everything a small business needs to deal with accounts and tax.
Modern “bookkeeping” is the best tool in the arsenal of any start-up. As an additional bonus, an online accountant can provide quick business set-up and tax planning advice. There are no spreadsheets to deal with and no delays to getting your business on track. By using online accounting software, business owners save time and money and are hassle and stress free, while always maintaining control and visibility of their company.