A lot of entrepreneurs start a business with a DIY mentality: Do everything you can yourself and don't pay for anything until you have absolutely have to. This is especially true when it comes to bookkeeping.
The trouble is that keeping accurate, up-to-date logs of trading is time-consuming and, if you get it wrong, it can cause problems further down the line.
What is bookkeeping?
Bookkeeping is the systematic recording, storing and retrieving of financial transactions for a company, nonprofit organisation or individual. It ensures that records of the individual financial transactions are correct, up-to-date and comprehensive. Accuracy is vital to the process.
Common financial transactions and tasks that are involved in bookkeeping include:
• Billing for goods sold or services provided to clients.
• Recording receipts from customers.
• Verifying and recording invoices from suppliers.
• Paying suppliers.
• Processing employees' pay and the related governmental reports.
• Monitoring individual accounts receivable (the money that a company has a right to receive because it had provided customers with goods and/or services)
• Recording depreciation (the assigning or allocating of a plant asset's cost to expense over the accounting periods that the asset is likely to be used) and other adjusting entries.
• Providing financial reports.
Recording transactions
As part of bookkeeping, you should record transactions daily.
For each transaction, there must be a document that describes the business transaction. This could be an invoice, a sales receipt, a supplier payment, bank payments of a payment ledger.
This provides an audit trail for each transaction and bookkeeping keeps a record of these documents. All businesses must undertake at least basic bookkeeping.
Is bookkeeping the same as accounting then?
Not exactly.
Bookkeeping provides the information from which accounts are prepared. It is a distinct process, that occurs within the broader scope of accounting.
Accounting makes sense of information compiled in bookkeeping
The process of accounting includes:
• Preparing adjusting entries (recording expenses that have occurred but aren’t yet recorded in the bookkeeping process)
• Preparing company financial statements
• Analysing costs of operations
• Completing income tax returns
• Aiding the business owner in understanding the impact of financial decisions
When might I need to employ a bookkeeper?
As your business grows bookkeeping can become an intrusion into the time you want to spend doing what you're good at.
Finding a reliable bookkeeper with a range of experience and knowledge can be a welcome relief therefore, helping you to feel confident that your paper trail is under control.
Here at KBL Accounts we provide bookkeeping services as well as a full range of accountancy services.
Outsourcing your bookkeeping to us will help you concentrate on business growth and our efficiently kept records will help you to remain in control of your finances as well as help to produce your annual accounts.
Call us today to find out more