Starting and running a new business is exciting, but bookkeeping is often seen as the less fun part of running a business. Many business owners dread the thought of having to “do the books”. And with the requirements of Making Tax Digital looming, the levels of fear are building in businesses all over Northumberland!
Fear not; you don’t have to be a maths genius or Excel guru to keep your own basic accounts. Basic bookkeeping can be simple once you get your head around it, and the latest cloud-based accounting systems are really easy to use and offer fantastic functionality. You must keep accurate financial records and you are required to keep them for six years. If you have very few monthly transactions this might be as simple as recording your sales and costs in a book or on a spreadsheet.
However, whichever method you choose to keep your accounts the important thing is to have a disciplined approach and ensure your records are regularly updated – set aside some time each week or month for this right from the start of your business trading (having to backtrack later just adds to the workload), and ensure you keep all your receipts and invoices as the evidence - it’s useful to give them a sequential number recording the same number against the transaction in your accounts. And if you are registered for VAT make sure you account for it properly. You should also avoid mixing business transactions and personal transactions – so keep a separate business bank account.
When you are deciding how you will keep your financial records you should also think about the information you need to make decisions on your business. When deciding on the system you are going to use you should aim to ensure it provides not only the information needed to keep the taxman happy, but the critical management information needed to effectively manage your business. This might be by simple analysis of your revenues and costs under different headings.
Some business owners may decide to use a bookkeeper to keep their basic records, and most will probably use an accountant. The two roles are separate but could be undertaken by the same person. Whilst part of an accountant's job is to manage the books they also prepare and file accounts and tax returns.
If you are still fearful, or you don’t know your debit from a credit, Business Northumberland can help. We have a range of resources on our website to help you manage your finances, and we offer a whole range of practical finance workshops.