Are you thinking of setting up your own business or do you currently run a small or medium sized business? Are you not exactly sure what bookkeeping is or what is involved in it? Well lucky for you, you have come to the right place. If you want to become an expert on all things bookkeeping, then keep reading our Guide to Bookkeeping For Your Business!
What exactly is bookkeeping?
First let’s explain exactly what bookkeeping is. Some people may be confused about exactly what bookkeeping is, however, it is generally a simple term to understand. Put simply, bookkeeping is a record of the financial transactions of a business (i.e., what goes in and what comes out of the business). Bookkeeping usually includes the following elements – sales ledger/accounts payable, purchase ledger/accounts payable, VAT administration, credit control management and reporting, and processing of all bank transactions, cash transactions, card receipts/payments and credit card payments.
Who needs bookkeeping?
Bookkeeping isn’t just something for big businesses, almost all businesses need to do at least some bookkeeping. If you are self-employed, operating as a sole trader or run a limited company, you are required to do bookkeeping. Additionally, if you obtain income from rentals you must fill in a personal tax return and in order to submit a personal tax return it is essential to do some bookkeeping.
Bookkeeping for sole traders and limited companies
It is important to be aware of how the structure of your business affects your bookkeeping. If you are a sole trader then there is no legal difference between your business and yourself which means that the profits from your business are yours to keep, which has implications for tax.
If you are a director, however, you are separate from your business which means that you have to record your business’s finances in addition to your own income.
What are the benefits of outsourcing bookkeeping?
There are many benefits to outsourcing your business’s bookkeeping. For example, by outsourcing your bookkeeping you will most likely end up saving money. By outsourcing your bookkeeping, you will have extra time to spend on your core business needs which most often results in financial savings. Also, by hiring a bookkeeper it will reduce errors as you will benefit from the expertise of an experienced bookkeeper.