Accurate bookkeeping is a necessity if you run your own business. It may seem to be something of a chore but it’s vitally important that you keep track of your revenue and outgoings. Many businesses which would otherwise have been successful have been brought down by their failure to maintain proper financial records. Whether you do it yourself or hire someone else to do it, bookkeeping is essential.
Taxes – You will have to provide information to HMRC regularly about your business’s profits or losses so that they can assess the amount of tax you owe. This information has to be accurate and presented in a professional manner. Failure to keep up to date with your tax affairs can lead to serious repercussions, as HMRC can impose large fines and penalties which could lead to the demise of your business.
Cash Flow – Keeping track of cash flow is critically important for any business and it’s only possible if you have accurate financial records. Many seemingly profitable and growing businesses have failed because they have suddenly been hit by an unexpected cash-flow crisis.
Expenses – Sole traders can claim specific expenses which have been wholly and exclusively incurred as part of their business. Expenses should always be paid for directly from the business bank account and should ideally be submitted on a monthly or quarterly basis. This ensures that the person doing the bookkeeping has an understanding of outgoings and can monitor them for tax and accounting purposes.
Profitability and Growth – Accurate bookkeeping allows you to see whether or not your business is actually making a profit. It is surprising how often business owners fail to keep track of this but it is obviously extremely important.
Bookkeeping also allows a business owner to have a greater understanding of how much progress has been made. You can look back and see patterns and draw comparisons with previous business years. This can provide a greater understanding of the areas within the business which make a profit and where costs might be trimmed. This kind of financial analysis can help you to avoid problems in the future.
Getting Help – Accountancy websites can provide in-depth information for any business. There is a ‘Knowledge Centre’ which has invaluable resources for sole traders and limited companies. The subjects covered include VAT, Tax Planning, Personal Tax, Company Tax, Insurance and Specialist Services.
It is, of course, possible to purchase software which you can use to carry out these bookkeeping tasks which would provide you with the data required to submit a return to HMRC. However, employing the services of a professional firm of accountants or a bookkeeper to manage the financial affairs of your company could prove to be profitable for your business in the long term. Not only would they help you to minimise your tax liabilities, but they can also provide valuable advice on other aspects of running a successful and profitable business.
Bookkeeping may seem a burden when you are trying to grow your business but it is essential if you are to not only survive but also prosper in today’s tough economic climate.
About the Author: This guest post has been written and contributed by Brit blogger Zoe, on behalf of http://www.brookson.co.uk/, who help with accounting for engineers, IT contractors and self-employed individuals.