Do I Need a Bookkeeper for my Small Business?

Do I need a bookkeeper for my small business? Bookkeeping is easy to handle and can be done at any time without any scheduled practice,” might be your thoughts as a new business owner. However, even for small businesses, managing and monitoring receipts and laying them out is time-consuming and crucial for business growth. If you are finding it difficult to manage bookkeeping, you might be thinking, “Do I need a bookkeeper for my small business?” Let’s dive into this article.

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Do I Need a Bookkeeper for My Small Business?

Do I need a bookkeeper for my small business? Bookkeeping and accounting are often confused by new business owners. Bookkeeping is small compared to accounting, but it is imperative for businesses, whether small or large.

Bookkeeping is defined as the process of keeping records of financial information and reporting it to higher officials. On the other hand, accounting is the process of using data obtained by bookkeeping to analyse the growth pattern of a business and predict its prospects. Accounting provides guidelines on how finances should be managed.

What Does Bookkeeping Involve?

Bookkeeping is managing the everyday finances of a business. It involves

• Making daily payments such as bills
• Track payments of clients and customers in your account
• Tracking tax amount if it is underpaid or overpaid
• Claiming tax relief by providing bookkeeping records as proof to the HMRC
• Managing payroll traffic by using automated bookkeeping software while informing HMRC simultaneously.

For tracking payments through bookkeeping, three financial records of businesses are used:

• Cashbook 

The cash book records payments coming to your account and payments made through your account.

• Sales invoice 

Sales invoice records your everyday sales records, including paid and unpaid invoices of sold items.

• Purchase invoice 

The purchase invoice involves all the services or products you bought for your business. It includes paid and unpaid invoices for bought items.

These records are the minimum requirement for the bookkeeping process, but you will need more if you have a larger business setup. Keeping accurate financial records is important for managing cash flow and keeping your records prepared for an audit.

Why We Need Bookkeepers for Small Businesses?

Since bookkeeping plays a key role in accounting operations, small businesses need to hire bookkeepers for regular bookkeeping tasks. Below are the reasons why we need bookkeepers for small businesses.

• Keep records of every payment

Keeping a record of every payment is important for a transparent cash flow in your small business. Bookkeepers are needed for small businesses to make use of their cash book to trace every payment and match the date on which the payment was made and recorded, so they can easily be tracked when needed.

• Choose an accounting method

Choosing a suitable accounting method for your small business is crucial for accurate and well-maintained office records. The bookkeeping practice will underpin your accounting, so it’s better to decide at the start of your small business which accounting method is better. Conventional accounting records only the income and expenses of the business with their date of invoice. On the other hand, cash accounting records the date when you pay or receive the money. It reduces the risk of overpaying tax; however, you are liable to pay tax if your annual turnover is £150,000 or less.

• Be strict with deadlines

You must meet the deadlines and never go for late payment, especially to the HMRC. Being strict in meeting deadlines helps you win the trust of your clients and attract more clients from the market as well. You must also keep records of the customers who make late payments so you can chase them if needed. This is called credit control and helps you keep your cash flow healthy. Bookkeepers are needed by small businesses to stick to the deadlines and make payments on time.

• Keep track of expenses

You should keep track of your expenses to reduce overheads in your small business venture. You need receipts or other proof of your expenses to claim your relief or allowance from the HMRC, so the receipts should be organised date-wise according to the business category in a folder. However, you should be careful in keeping your personal and business expenses separate, which will be useful while filing tax returns and estimating your gains.

•  File bank statements and invoices in order

All your bank statements and invoices should be organised in a file according to their sale or purchase type. They should be in the correct date order, with the latest one on top. This will make tracking and sorting your transactions easier while filing tax returns. If any of these documents are missing, you might be charged a fine for a late tax return filing.

For purchase invoices, there should be separate sections for paid and unpaid invoices, and in case of sale invoices, you should number them in order of the date they are paid.

• Produce monthly reports

Producing monthly reports makes your bookkeeping task easier, and it is the best way to track the growth of your business finances and reduce hassle in tax filing and audit procedures. The monthly report should include a profit and loss statement and a balance sheet of the audit office. These monthly reports are an insight into the company’s performance and help in keeping the financial health on track.

• Know When to Outsource Your Bookkeeping

In the case of small businesses, owners usually think they can keep track of their financial matters; however, bookkeepers are needed by small businesses to keep the business matters updated while complying with the rules and regulations set by the HMRC. The bookkeepers can maintain the record according to the recent changes by the UK government while owners can easily focus on the other important matters of their business.

Conclusion

Do I need a bookkeeper for my small business? Bookkeeping is essential for the growth of a small business. However, at the start, owners may think they can handle the bookkeeping matters by themselves, but they need a bookkeeper to keep the financial matters updated. Moreover, bookkeepers can keep the company records updated according to the recent changes made by the UK government. Bookkeepers can keep the financial records organised and updated for audit sessions and tax return filing at the end of the year. Bookkeepers can help you claim relief or allowance from the HMRC by providing a record of sales or purchases done in the financial year.

Disclaimer: All the information provided in this article on Do I need a bookkeeper for my small business, including all the text and graphics, is general in nature. It does not intend to disregard any professional advice.