The Essential Facts about Bookkeeping You Should Know Today

If you are running a small- to medium-sized business, you know very well that bookkeeping has a crucial role to play in keeping your financial affairs in good order. Your business’ financial accounts should make sense, and the only way they can make sense is if you keep track of them and record everything that goes on. But there’s a lot more to bookkeeping than meets the eye, and if you want to be sure that you (or any one of your staff) are doing it right, here are the essential facts about bookkeeping you should know today.

Know the difference

Whilst accounting and bookkeeping are often used by people interchangeably; there are some critical differences between the two. Bookkeeping is just a portion of the complete accounting aspect of your business, and it is simply the process of keeping records and making reports of your financial data. Meanwhile, accounting uses the said data to see your financial condition and position and decide how you can best manage your finances.

The basic functions of bookkeeping

As stated, bookkeeping is the management of your daily finances. The primary functions of such a task include paying bills, chasing customer payments, making sure you pay the proper taxes, claiming taxes back, and managing your business’ payroll so you can correctly pay your employees and HMRC.

According to expert GSM accountants in central London, you need three records for bookkeeping, namely your cashbook, your sales invoice, and your purchase invoice. Your cashbook will have a record of the cash flow of your business. Your sales invoice will show what you have sold (this should include your paid invoices as well as unpaid ones). Finally, your purchase invoice is a record of what you have purchased and how you settled the payment for those purchases.

Know the essential pointers

  • Note down all payment transactions

Your bookkeeping records need to include all your payment transactions, no matter how seemingly small or insignificant. The details should consist of when you made a transaction plus when you received one, so it will be easier to find each transaction if you need to check it later on.

  • Be careful with deadlines

It will never be a good idea to miss a deadline, and this is particularly true for HMRC. Avoid making any late payment because you will face a fine or penalty. But it goes both ways as well – give your customers and clients a deadline for their payments so you can more effectively chase them. If some clients regularly pay late, perhaps it’s time to consider ending your contract with them. It’s simply not worth it if they will affect your cash flow, which can form part of establishing good credit control practices.

  • Check what you can claim on taxes

Fortunately, you can claim back taxes from various expenses, so take advantage of this to decrease your overhead costs. Make sure to keep all the receipts related to your tax claims because you need to show these to HMRC. Keep them in a safe place and organise them into various categories as well. Here’s another tip: keep your personal expenditures separate from your business expenditures so it’s easier to see which expenditures you can claim against your business’ profits.

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