Why good bookkeeping is vital to the success of your business.
Good bookkeeping leads to good business management and growth. Often small businesses prepare their bookkeeping purely to give to their accountant at the end of their tax year. This means that they are missing out on vital information to help make business decisions throughout the year.
What information will bookkeeping give me?
1. Are you charging enough?
Without examining the costs involved in creating your product or providing your service how do you know you are covering your costs? Without regular bookkeeping, you may not find out what products or services are either making or losing you money until over a year after the start of your year. By keeping on top of your costs you will be able to adjust your fees accordingly and ensure you are making a profit.
2. Cash Flow
Cash flow management is the key to the survival of a small business. Regular bookkeeping ensures that you know which customers have paid and are able to chase late payments. You will know how much money you have coming in and will be able to budget for paying your suppliers, staff and yourself. You will also be able to budget for larger investments.
By knowing how much profit you have made enables you to budget for your tax bill at the end of the year.
4. Business Planning
By keeping up with the finances of your business you can monitor your plans and spot any issues before they escalate. By doing your finances once a year you may not be so lucky.
5. Legal Requirement
Proper record keeping is required by law for limited companies so regular bookkeeping will ensure you are compliant.
We recommend you prepare monthly management accounts to ensure you are in a position to make informed business decisions and be in a position to quickly rectify any issues. If you are unsure of the best way to set up and run your bookkeeping you should speak to your accountant. They should be able to advise you on the best solution for you.
The key points to consider are;
- Accounting software or spreadsheets? We can provide you with a template spreadsheet or discounted accountancy software. The key is having a system in place which you understand and are happy to use on a regular basis.
- Who will run the bookkeeping? Do you realistically have the time to do your bookkeeping? If not you should outsource it. We provide a bookkeeping service which provides not only a cost-effective way of keeping you up to date and informed but also reduces your year-end accountancy bill too.