There may be a whole lot of tasks you have to do for your small business, and bookkeeping is definitely one of the most important ones. Bookkeeping isn't familiar to everyone, however, and you may be unsure of how to tackle it properly. Initially, you can act as the bookkeeper for your business whilst it is still in its starting phase, but as it grows, you may want to delegate this task to someone else. But it still pays to learn as much as you can about how to do it right, just so you will always be aware of your business's financial standing. So what are the most important pointers you should remember when doing bookkeeping for your small business? Here's your guide.
Know the difference
Accounting and bookkeeping are two terms that are often interchanged, and understandably so. But there is a difference between the two. Bookkeeping, in essence, is the recording as well as reporting of your financial transactions and information, whilst accounting is the analysis of your financial transactions and information and the creation of a financial system or strategy. Accounting helps you make decisions based on your position financially, whilst bookkeeping is more of the recording and collation of your financial details.
Know what’s involved
Bookkeeping is the overall management of your finances from day to day, and it includes such aspects as paying your bills, chasing client payments, calculating and paying the right amount of taxes, claiming taxes for your business expenses, and managing your business’ payroll so you can pay your workforce and HMRC properly.
You can keep track of all your payments with three kinds of financial records – your cashbook, sales invoice, and purchase invoice. The cashbook will record all your business's cash flow, which includes everything that moves in or out of your accounts. The sales invoice is a record of what you have sold (including your paid and unpaid invoices). The purchase invoice, on the other hand, is a record of what you have bought as well as how you paid for it.
Keep in mind that these are only the most basic; you will probably have more as your business expands, as experienced GSM Accountants in central London will attest.
Points to remember:
- Keep a record of each bill or payment. Record all payment transactions in your books and note when you made them and when they were received.
- Be mindful of deadlines. It will not do to settle payments late, especially when it comes to HMRC, because you can end up with penalties. If you are sending out invoices, give deadlines to your clients for the more effective chasing of payments. Note down those who pay late and think about cancelling their contract if they are serial late-payers. This is termed credit control, and your aim with this is to ensure a healthy cash flow for your business.
- Keep proper track of your expenses. As mentioned, this is an obvious bookkeeping task, but in line with this, you can claim your taxes back from your expenses so you can decrease your overheads. Make sure you keep your receipts and organise them so it will be easier to present them to HMRC when you claim your taxes.
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