Bookkeeping is an essential job when running a business. It’s part of the process in accounting and involves recording financial transactions.
Many small business owners, particularly sole traders or small companies, may find bookkeeping to be a real chore.
But without it, you won’t know what’s happening in your business financially.
At Concept Accountancy, we offer bookkeeping services like many firms in Newcastle. But it is a different service to accountancy.
For anyone new to business or who confuse bookkeeping with accounting, let me explain what you need to know.
Is there a difference between bookkeeping and accounts?
Bookkeeping is the regular task of recording and monitoring the financial transactions of your business. It is usually carried out by a qualified bookkeeper in accountancy firms like Concept.
Accountants tend not to carry out bookkeeping because their specialism is in interpreting and analysing the financial data.
But if that data isn’t recorded correctly, an accountant will have real problems analysing the data. This is where bookkeepers come into their own as they monitor the cash that’s coming in and out of the business.
Let us say you are a small business or SME in Newcastle and need to know how healthy your business is.
If you haven’t kept bookkeeping records correctly you won’t really understand why your bank balance stands at any particular time. Just looking at the cash in your bank doesn’t always tell the full story.
Some business owners will keep their own books, but many will employ the services of bookkeepers.
Many are individual specialists but here at Concept Accountancy, we offer a bookkeeping service. So what do you need to record?
The essentials
Bookkeeping is, as we have said, a way of tracking and recording the numbers in your business. It is essential and good bookkeeping allows you to track the performance of your business.
Correctly recording the data makes it easy for an accountant to assess your business and it means you will always pay the correct taxes.
The person or people responsible for bookkeeping will look after, among other things:
- Expense payments to suppliers
- Loan payments
- Customer payments for invoices
- Monitoring asset depreciation
- Generating financial reports
Why does it matter
You need to keep up-to-date records of what cash is coming in and out of your business so you know what you’re owed. If you know that you will know if you have enough money to pay what you owe, whether that’s bills or for staff or contractors.
Recording transactions
To keep tabs on financial transactions that happen daily, you need to record them into your accounting system. Although that’s often digitally these days, they’re still known as books.
For each transaction, there must be a document that describes the business transaction. This can include a sales invoice, sales receipts, supplier invoices, bank payments, etc.
The documents provide an audit trail for your transactions and are an important part of maintaining accurate records. These records help your accountant understand the strengths and weaknesses of your business. They also ensure you don’t over or underpay HMRC!
Traditional way
As already mentioned, the name goes back to the days when physical books were used to record transactions.
Each transaction created a paper-trail of finances and it traditionally involved ledgers, charts of accounts and a double-entry system.
Double-entry is based on the fact that every transaction has two parts, which affects two ledger accounts.
Each transaction involves a debit or credit entry in an account. It is very much like an error-detection system and if, at any point, the sum of debits doesn’t quite equal the corresponding sum of credits, there is an error in your books.
Debits are the sum owed and are recorded on the left side of the double-entry book. Credits – such as income and other financial gains – are recorded on the right side.
Modern way
For anyone who dislikes the idea of buying hard-backed books, don’t worry! Technology means bookkeeping is a lot easier than it used to be.
Software has been developed over the years which allows transactions to be tracked simply, even via smartphones.
You may have heard of Xero or Quickbooks. These and other platforms allow you to keep records without fearing you may lose the receipt or piece of paper given.
At Concept Accountancy, we are official partners of Xero or Quickbooks, but we also work with other types of bookkeeping software as each offer something different to the user.
Whether you use paper or software, bookkeeping is something you can’t ignore. If you’re still unsure or want to know more about our bookkeeping services, you can contact us today for details.