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What is bookkeeping? Bookkeeping is the accurate recording and processing of financial transactions for your business allowing accounts to be prepared.
Why is it important? In summary, keeping bookkeeping up to date is an important part of running a business and can help in various ways as it allows a clear understanding of the businesses position.
Most people tend to put off boring paperwork. So how can we persuade you to give it the attention it deserves? Below are some of the reasons why it’s essential it’s accurate and kept up to date:-
Having up to date records allows your accountant to submit any required statutory returns ahead of deadlines, avoiding penalties and interest being charged. It also allows your accountant to prepare your accounts earlier than the deadline which enables you to plan in advance for any upcoming payments avoiding an accumulation of payments in one go.
Planning ahead? No one can know 100% what is going to happen in the future but having up to date records means you will be able to do strategic planning for your business and this can only be determined by understanding the current business position. With up to date information, it also allows you to monitor and control your expenses and work out the best ways to spend and invest your money.
Having bookkeeping up to date is a good way of keeping on top of any receipts which may be due to your business from customers as this allows you to run an accurate debtors report to see who still owes you money which then you can deal with accordingly. This will also reduce bad debt risk.
VAT invoices from suppliers are a big part of bookkeeping and are significantly important when it comes to keeping everything up to date as these receipts allow you to reclaim any VAT and reduce the amount payable to HMRC. Using software like Dext (Previously known as Receipt Bank) is an extremely useful app that allows you to upload your invoices and receipts directly, as soon as you receive them, simply by taking a picture or forwarding via email.
Having incomplete records can become a big issue for HMRC. They can charge you penalties if your records are not “accurate, complete and readable”. If subsequent documentation turns out to prove the figures are inaccurate you may also be liable to pay interest or further penalties if it has led to tax being underpaid. As a limited company, you must keep your records for 6 years from the end of the last company financial year they relate (plus the current year).
One question we often get asked is “How much dividend can I take?” or “What salary can I take?” This is where it becomes extremely important to have records up to date for the benefit of you personally. Without up-to-date information, we are unable to advise 100% on amounts that can be taken at that moment in time. Furthermore, we can keep an eye on this and advise you without you asking if we think this is something you are able to do and will benefit from it.
Any lender will want to look at and analyse your accounts before providing funds. Having all of this up to date enables answers to all their questions. The prospect of raising finance will be significantly higher. Soaring sales don’t always mean high profits if you don’t keep track of expenses too and keeping all of this in order helps reduce the risk of cash flow problems and increases the chance of being able to borrow money.
Here at Q, we offer a variety of packages that suit best for your business. Our services include using Dext and Xero which help smooth the process and if it is something that you would be interested in discussing with us further, please get in touch for a free consultation.