Accurate bookkeeping lays the foundations for a successful business, and therefore it cannot be underestimated. If bookkeeping is completed in an effective and timely manner, it can point towards the performance of a business allowing owners to make informed decisions about company growth. Due to its importance, we have created an overview of bookkeeping and the benefits of keeping accurate records.
Accurate bookkeeping can be a meticulous and time-consuming process as a precise record of all funds paid and received within a business must be maintained. Bookkeeping also accounts for the money the business owes employees, vendors, contractors, lenders and tax agencies. Equally, effective bookkeeping also states the amount owed to a business by other organisations or individuals.
Below is a list of some basic definitions included in standard accounting practice:
- Revenue and Expenses: It’s paramount that a business is aware of what funds are entering and leaving their accounts and where this money came from, and where it is going. To achieve this, every transaction must be recorded.
- Cash: To determine accurate business expenditure, record the amount of cash a business annually spends, no matter how small or large the sum may be.
- Inventory: It is critical to keep inventory records to understand your source of revenue. To keep an accurate inventory record, note the dates of when inventory was purchased, its cost, stock numbers, merchandise sale dates and sale prices. This data will prevent stealing and lost merchandise whilst keeping track of business trends to estimate yields in the upcoming year. If this data is not accurately recorded, a business will make important decisions based on incorrect statistics, which can lead to issues further down the line.
- Accounts Receivable and Payable: It is important to keep track of what you are owed from customers and what you owe in debt. To achieve this, record invoice dates, numbers, sale quantity, amounts due or paid and updated client information.
The Benefits of Accurate Bookkeeping
Bookkeeping and accounting are essential elements when managing a business as these records provide the business owner with critical insight into their company performance. In addition, maintaining up-to-date records of your operations will alert you to any cash flow or tax issues.
Business tax, income tax and the preparation of tax returns will be determined through a company’s books. It may be the case that tax agencies will investigate a reported tax return, in which case business owners are required to forward accurate records.
Failure to provide accurate books could lead to additional accountancy fees or time-consuming resolutions. In severe cases, bookkeeping inconsistencies could also result in a substantial fine from HMRC or even imprisonment. As a business owner, you must take steps to produce accurate bookkeeping and avoid these situations.
Bookkeeping can be a daunting task, and therefore we recommend consulting with an expert, especially during the initial stages of a business. As a company develops, it’s likely it will hire a bookkeeper to ensure all the elements mentioned above are completed to a professional standard.
If you require professional and transparent advice, Nottingham Accountancy has a dedicated team of professional accountants to help keep track of your bookkeeping, allowing business owners to focus their time on company growth and customers. We offer a full range of bookkeeping services in Nottingham, providing clients with regular bookkeeping reviews, customer care with our friendly team and fixed fees.