We are experts in bookkeeping
Local bookkeepers provide a valuable service for businesses of all sizes. In order to maintain accurate cash flow records, it is vital that stringent bookkeeping practices are put in place. This entails recording all money that comes into a business in the form of a record of sales, paying taxes, as well as keeping track of all outgoings.
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The need for bookkeeping for business
There are many reasons that all businesses need to maintain a good paper trail when it comes to their business.
Firstly, bookkeeping allows a business to understand its financial situation. When a company’s income and expenses are well organised, it makes it possible to budget in a more effective manner.
Secondly, by following good practice bookkeeping basics, a business will be able to pay accurate taxes. Submitting tax returns is a complex process that requires a great deal of preparation beforehand. Having good bookkeeping systems in place will mean that a business is not going to be at risk of submitting an inaccurate tax return.
Finally, the importance of bookkeeping can really be felt when it comes to protecting a business from fraudulent activity. By Implementing rigorous ledger journals it is possible to minimize the risk of a business falling victim to internal fraud.
Understanding the basics of bookkeeping
While bookkeeping can be quite a complex area, it is important that even if a business is using local bookkeepers to maintain journals of their income and expenditure, they still understand a few basics of bookkeeping.
Here are some of the bookkeeping basics that all business owners and managers need an understanding of:
- Cash This is a fundamental area of bookkeeping. Records of all business transactions must pass through the cash journals.
- Accounts Receivable If a company sells products or services and takes payment at a later date, then it is vital to track any money owed. These are known as receivables. These need to be kept up to date in order to ensure the business issues invoices and receives payments in a timely manner.
- Inventory For any business that sells a product, any unsold stock has a value and should be counted and tracked. It is vital that all inventory gets physically counted periodically to ensure accuracy.
- Payroll Expenses Staffing costs can often be one of the largest outgoings that a company may have to handle. It is vital that these are recorded accurately and are updated. There are legal obligations on companies to maintain payroll and tax payments as well as to report figures to the tax office.
- Accounts Payable All businesses will have outgoings. By logging these in accounts payable it means that the business is less likely to miss a payment or pay twice in error.
- Loans Payable If a business has taken out a loan to buy equipment, stock, vehicles, or anything else, then repayments on this loan need to be tracked and accounted for in loans payable.
- Retained Earnings When a company reinvests is profits from a previous period instead of paying them out to the owners, these are retained earnings. This needs to be recorded on the balance sheet for the business.
- Owner’s Equity If a business owner has paid in their own money into a business then it is vital that this is recorded. These are also known as net assets.
Understanding the concept of a balance sheet
A balance sheet provides vital information about the resources or assets that a company holds as well as all sources of capital. The balance sheet helps to provide an assessment of the company’s ability to meet its current operating needs as well as ensuring that it is able to meet any debt repayments and distribute payments to the owners. There is a simple equation that forms the basis of the balance sheet and this is ‘Equity plus Liabilities equals Assets’
The balance sheet will allow the bookkeeper to make a distinction between any assets that are current, and those that are non-current. It allows anyone to make an assessment to ascertain the liquidity of the company and its ability to meet financial obligations such as debts and payments while meeting the short-term operational needs.
Using balance sheets to record daily finances will prevent a business from running into trouble later on. By having a bookkeeper maintain journals, a company will prevent problems when completing their tax returns. Understanding the importance of bookkeeping is essential as it can ensure a business has an understanding of its liquidity and ability to continue trading.
What are the types of bookkeeping?
There are several different types of bookkeeping two very commonly used models include.
- A single-entry system This system can be used for a business that has fairly simple or fewer transactions. This system will record all of the cash sales and expenses. This system is generally not used if the business has accounts receivable, or accounts payable. Essentially, this system consists of a cash sales journal, a cash disbursements journal, and the business’ bank statements. Records are made of any money in and out, and these are reconciled against the companies bank statements.
- A double-entry system If a business has more complex transactions as well as income that is collected through invoices, then a double-entry system may be required. It is known as a double-entry system because each transaction will be posted as an income or an expense item and then a second entry is created to track the transaction to the relevant customer account. This helps create a paper trail so that all transactions can be accounted for if a business is audited.
A bookkeeper will be able to identify the type of bookkeeping that will be most effective and relevant to a business based on the complexity of their transactions.
Can bookkeepers do tax returns?
Tax returns are an important process that all businesses are legally required to carry out. There are several different types of tax return, for a sole-trader, there are self-assessment tax returns. These can be done by a bookkeeper. There are also areas of taxation such as corporation tax, calculated capital gains tax, as well as more complex self-assessment tax returns. While a bookkeeper can assist in preparing these areas by maintaining a high standard of recording across all of the business accounts, and accountant may be required to complete these higher-level tax functions. However, assuming all financial records are well maintained by the bookkeeper, this will help the account to process these tax returns in a more timely fashion.
A bookkeeper becomes essential in ensuring that an accountant does not need to try and piece together vital details for a complex tax return. Paying for an accountant is expensive, and if possible, this should be minimised as much as possible. If a business invests in having their books managed on a daily or weekly basis by a bookkeeper, there are long-term savings when it comes to an accountant completing the tax returns periodically.
Can bookkeepers give financial advice?
Getting the right advice is important for any business. Owners and managers of companies will need to make complex and important financial; decisions at all times. In order to do this in the most effective manner, they will need to know where they can turn.
Bookkeepers will have a high degree of knowledge surrounding the recording and management of all of a business’s accounts. They will very often have an area of specialism. A bookkeeper may be able to advise a business on many aspects that relate to the management and maintaining of certain financial ledgers.
A bookkeeper may be able to advise on the financial liquidity of the business and the current state of the business assets. This can help a business owner to get a clear picture of the situation in order to make their own financial decisions. A bookkeeper or an accountant may be able to advise on certain financial matters, however, if a business owner requires in-depth financial advice on potential areas of investment, outside of providing information on the liquidity of a company and the status of any debts, business owners should seek investment advice from a financial advisor.
What is a full charge bookkeeper?
Bookkeepers can manage and maintain all of a companies ledgers ensuring stringent controls are in place in key areas such as managing payroll, keeping an accurate record of sales, monitoring and tracking accounts payable and accounts receivable, as well as maintaining inventory control. The financial responsibilities of bookkeepers generally stop at paying taxes. At this point, the books are usually handed over to an accountant and they will make the necessary tax returns to HMRC.
A full charge bookkeeper will be able to combine the functions of a bookkeeper as well as the handing of accounting duties for a small to medium-size business. A full charge bookkeeper is often used by smaller or medium-sized businesses to reduce the need to use an accountant for many of the higher-end bookkeeping services. This can help to streamline the costs of a smaller business and remove the necessity for additional finance functions to be brought in.
Do bookkeepers use QuickBooks?
Many bookkeepers will use software such as QuickBooks in order to assist them with maintaining the books. There are several different bookkeeping applications on the market, and QuickBooks is a very popular choice.
QuickBooks is a very user-friendly system that allows bookkeepers and businesses to easily manage and maintain their cash flow, ledgers, and balance sheets. It has numerous benefits to businesses of all sizes, and, with a variety of different features, it saves a lot of time and effort when it comes to managing the finances of any small to medium-sized business.
Along with Inuit QuickBooks, there are also many other types of software that some bookkeepers will opt for, all of which will have their features and benefits.
What is QuickBooks bookkeeping?
Computerised bookkeeping is important in the tracking and management of all of a business’ finances. By using technology, it is easier for bookkeepers to do their jobs, providing greater time savings, and more accurate recording. The ability to quickly look-up or recall a transaction will have major time-saving benefits when it comes to auditing areas such as accounts receivable or payroll expenses.
Intuit QuickBooks is a system that is very effective in maintaining a business’ financial accounts all in one place. Using QuickBooks helps smaller businesses and sole traders keep on top of their self-assessment tax returns, while the software is also able to scan for errors that may affect VAT returns. In order to reconcile the cash sales and cash disbursements of a business, with their bank account, the software can be connected directly to the account in question.
All invoices and receipts that are of relevance to the expenses of the business can be captured by the application and the details of the transaction will be automatically recorded and populated into the relevant sections. QuickBooks allows bookkeepers to control payroll and monitor deductions such as tax, pension, and national insurance contributions.