When you start your own business, one of the key services that you may need to put in place is bookkeeping. What is bookkeeping and why would you need it, though?
Bookkeeping is defined as the recording and correct organisation of your business’ financial transactions. It is considered to be a good habit to adopt from the very beginning of your business. There are two different approaches that can be taken in bookkeeping – single entry or double entry.
Double entry bookkeeping is the more sophisticated approach of the two which records two entries for each transaction. This double entry considers expenditure and income as two separate parts and therefore, will log an expenditure and income each time there is a transaction within the business. Double entry booking is where the term “balancing the books” comes from. Each ledger – expenditure and income is expected to balance.
So, why do you need a bookkeeper?
Keeping a record of any financial transactions within your business is a legal requirement. However, there are other reasons why bookkeeping is essential for your business.
When all of your income and expenses are properly organised and visible, you can easily review what funds you have available. This, in turn, allows you to make more informed business decisions which you can be confident are based on up to date, accurate information.
Analyse your current position
As well as helping you to make business decisions, bookkeeping also gives you a snapshot of your business’ performance. From your financial statements, you can identify whether your business is profitable or not and if there are any areas of expense that need adjusting.
As a small business, you will need to submit an annual tax return. You may also be required to submit a Self-Assessment tax return if you are classed as self-employed. Bookkeeping helps to prepare for your tax returns, making the actual submission of the return easier when the time comes.
Bookkeeping keeps you in the loop and up to date with your business performance. This makes it essential for ensuring that your business runs and grows successful.
OakHouse Professional provide a professional service that works flexibly with you depending upon your requirements. Find out more on our Bookkeeping Service page.