When a business is just getting on its financial feet many entrepreneurs view administrative tasks as an unwelcome distraction. They may even be regarded as comparatively unimportant to the more sales and operation-orientated tasks.
But there are a number of reasons why getting bookkeeping right from the world go should be a top priority for start-ups and small businesses alike.
Keeping HMRC Happy
Avoiding HMRC fines is the most obvious upside of good bookkeeping. Record keeping is an ongoing responsibility not an annual event.
With fines of up to three thousand pounds for businesses that fail to keep proper records, it is worth investing time and money in good book keeping practices.
It is also of course a business’s responsibility to present financial information to HMRC annually. This must be in a timely and professional manner – accuracy is essential.
Managing Tax Liabilities
Bookkeeping can also help reduce a business’s tax bill at the end of each tax year.
There are a number of business costs that can be written off and good bookkeeping can be used to keep on top of them.
Expenses should be paid for directly from the business bank account and ideally submitted on a monthly or quarterly basis.
Managing Business Growth
Careful bookkeeping is also important for business growth.
At some point, a business may need to seek financing. If a business has good accounting records, this will be one less obstacle to potential lenders or investors.
Investors will often want to see all of the accounting records, even from the first years of business. By keeping on top of a business’s accounts from day one, businesses can be prepared for this.
Foundations of Good Bookkeeping
There are a number of steps start-ups and small businesses can take to establish good bookkeeping practices.
A bookkeeping system is the starting point for a business to keep its books in order, and the business’s accountant should be the first port of call. As someone who knows the business and usually has experience with different accounting systems, an accountant can either do the bookkeeping for you or recommend the most suitable software package to use internally.
Alternatively, employing a bookkeeper is another way of doing this where the costs can be justified and the necessary skills are not available in-house.
Keeping on Top of Paperwork
Good bookkeeping goes hand in hand with good paperwork.
Reviewing your paperwork system will improve your procedures. This can also simplify processes, saving on both time and costs.
Companies such as Keebo.com and receipt-bank.com will, for a fee, process and track receipts and invoices, by scanning, sorting and making all this available online.
Bookkeeping is one of the basic essentials that all businesses must manage. Complying with legislative requirements is just the start; successful businesses need bookkeeping to be timely and efficient in order to keep abreast of how well the business is operating.
If you do not have the skills to do it yourself then there is plenty of help available to help you keep your records meticulous and your business in shape.
For more information contact our expert, Richard Malone