A small business can be defined as a company that has between 11 and 50 employees with an annual turnover of under £7,000,000. Whether your small business is newly established or about to expand into a medium enterprise, your books remain the beating heart of your business. After all, if your books don’t add up then the rest of your business could crumble. Find an Accountant near you.
Here are our thoughts on why bookkeeping is important for small businesses to tell you more.
Bookkeeping: A Quick Summary
There are several methods of bookkeeping with the foremost common type being single entry bookkeeping. This takes an easy approach where one entry is formed for each transaction. It’s suitable for smaller companies that do not buy or sell credit and only hold small amounts of inventory.
All businesses need to keep a record of their transactions. There are several reasons for this. From an operational perspective, you want to make sure you can afford all of your business overheads. From staff wages to paying suppliers – if your books aren’t balanced, you could soon run into financial trouble.
It Helps You Budget
As you take those first tentative steps into starting your own business, cash flow is an obvious concern. Bookkeeping allows you to see an up to date picture of where your business is at. So if you were thinking of hiring more employees or splashing out on new equipment, the books will be the ultimate decider of whether that’s going to be possible or not.
Not consulting your books would be the equivalent of never checking your bank account. But, if you keep constantly in the loop by regularly filling yours out, you won’t be in for any nasty surprises. Plus, you’ll be better placed to budget for your tax return too which can make or break a business if it can’t afford to pay what it owes.
Tax Preparation
As we just alluded to, tax returns play a big part in the reason for bookkeeping. However, there’s a lot that comes before paying your tax bill that bookkeeping is essential for. That’s because, to calculate what you owe and what can also be deducted, your accountant is going to need to see your books.
As a small business, you aren’t going to have large finance departments who will do the bookkeeping for you, meaning your tax preparation could get forgotten about. But by making time each week to complete your books, you’ll be better prepared for what’s ahead when you do finally sit down with your accountant.
Peace Of Mind
Running a small business is no easy feat, especially if you have to wear several hats to get the job done. Bookkeeping can be highly stressful for any small business owner. But if you don’t bother at all, or if you don’t concentrate on completing it properly, this can cause an even bigger headache later on when HMRC asks to see your books to prove what you submitted was correct.
But, if you know your books are being completed regularly and are accurate to the penny, you’ll be able to concentrate on why you got into business and not just the inner workings of it. An efficient system will help to improve your business as a whole because you aren’t being tied down by the admin side of things.
To Sum Up
Regardless of the nature of your small business, bookkeeping remains an essential task that all business owners need to keep on top of. Doing so will give a much clearer picture of where your business is at, plus you’ll be better prepared for your tax return too.
If you lack the time or knowledge to complete your own books, then you should consider hiring a bookkeeper instead. That way, it will relieve some of the pressure that comes with running a business, especially since this is one task that cannot be skipped if you want to continue trading.
Chris Mcdonald has been the lead news writer at complete connection. His passion for helping people in all aspects of online marketing flows through in the expert industry coverage he provides. Chris is also an author of tech blog Area19delegate. He likes spending his time with family, studying martial arts and plucking fat bass guitar strings.