Bookkeeping for small business – How to do it and why is it important
Bookkeeping is the recording of financial transactions and is an important part of the process of accounting in business. It is also keeping track of money that goes in and out of your business. Over the years, these were managed through using books and ledgers but in this digital age, bookkeeping software has replaced the books and ledgers – and it is still as important as before.
How is bookkeeping done?
There are two most important task in bookkeeping – recording and reconciliation.
Recording
- Record every transaction both income and purchase. By recording, this means that every business-related purchase is to be noted. In the past, this was done by writing them into a cashbook or putting them in a spreadsheet. Now, you can use bookkeeping software such as Xero. It’s easier to use and more convenient, you can just take a photo of the receipt and you have it in Xero with a copy of it so no extra filing required!
Reconciling
- This is process of regularly cross referencing your business books and your bank statements to make sure that all transactions made are balanced. And if not, you need to identify the reasons why. Things such as bank fees, interest payments, deposits and the like must be taken down and accounted. Reconciling can be done weekly, monthly, or whichever works best for you but the earlier you reconcile transactions, the earlier errors can be found and corrected.
Why is there a need for Bookkeeping in your Business?
- You can keep track of the money you are making. Whether you are making more money than you are spending or spending too much it allows you to make necessary decisions as real time as your bookkeeping is up-to-date.
- Accurate and up-to-date records are essential for your business. Bookkeeping will help you plan and budget and avoid cash-flow issues that may arise.
- You can easily find incorrect payments or duplicate invoicing or any payment issues that might cost you to spend more.
- You can complete and submit a more accurate tax return.
- Organized, complete, and up-to-date financial information makes it easier to work with various parties that you need – lenders, investors, accountants.
If you need help with your books and in need of an expert bookkeeping support, we can help. Call us today and discuss how we can help you. You may reach us at 01892 807 001 or email us at accounts@nayloraccountancy.com.
