If you are just diving into the world of accounting or you would like a refresher on how to bookkeep, then look no further because in this article we are going to be guiding you through some of our top tips and advice for getting started with bookkeeping.
Firstly, what is bookkeeping?
Bookkeeping for any business, no matter how big or small, is a vital part of managing finances. Keeping these financial records will allow your finances throughout the months or years to make sense. Whether you’re planning on creating and managing these books yourself or hiring an accountant, it is important to understand the essentials and the importance of bookkeeping.
What is the difference between bookkeeping and accounting?
There is a common misconception that bookkeeping and accounting are the same thing. Bookkeeping falls under the accounting umbrella and they do share differences. Bookkeeping is a process where you record financial information like transactions going in and out of the business. Accounting is where you use the bookkeeping data and use that to finalise the business’s financial position and accountants will help make a strategy for managing finances.
In the world of bookkeeping, you will manage the day-to-day finances of your business to give you an idea of where you’re up to with managing your money I.e., how much have you spent vs. How much you’re earning.
Bookkeeping will typically include the following:
- Any payments made – for example, bills or material costs
- Receiving payments from customers and clients
- Making sure you are paying the correct amount of tax, and you are claiming back tax from things such as your business expenses
- Managing your payroll for staff, HMRC, and yourself
You can manage your finances through three different types of financial records, these are cashbook, sales invoices, and purchase invoices.
Cashbooks are used to record cash flow which is the income and outgoings in a business. Sales invoices record all transactions for everything you have sold. Purchase invoices are also known as receipts, they record what you have bought for the business, for example, services, materials, etc.
These are the absolute basics you need to record finances for a business. You must make these books as honestly and accurately as possible in order for the submission process to be completed, especially if you’re called in for an audit or you receive a letter from HMRC.
If you’re a small business, there are many in-depth guides that can help you get started in bookkeeping.
Here are some basic pointers to help start your books:
- Keep every record of payment
- Choose a reliable accounting method
- Set a deadline and commit to it
- Keep track of finances and file all records in order of the date
- Produce monthly reports and spreadsheets
Here at MCC Accountants, we are a team of reliable experts who are dedicated to giving you the best advice in the accounting industry. If you would like to find out more about our accounting services, then please contact us.