What is bookkeeping?
What is book-keeping? Could you describe what the term means as a business owner? Are you interested in becoming a book-keeper and want to find out more? This is the first in a series of articles all about book-keeping aimed at business owners, together with book-keepers and potential book-keepers.
Book-keeping in simple terms it is the ongoing recording of all financial transactions of a business
What is a financial transaction? A record of something that a business sells or buys. All spending or income that goes through the bank. This would be a minimum requirement of any business – to keep a record of all these transactions on a regular ongoing basis.
It’s the law!
Any business in the UK, regardless of size, is required by law to keep a record of all financial transactions. The term “keep books” is an historical term for when they really were using large physical books – also known as ledgers. Recording each and every transaction. Thankfully things have moved on immensely since those dark days as you will discover!
Book-keeping is an essential skill that anyone with a reasonable grasp of maths can learn. It helps, of course, if you have an interest or an aptitude for figures.
Book-keeping forms the basis of the financial reporting (usually completed by an accountant) and management information reports to show how the business is performing. It is essential that everything is accurate. An eye for detail is therefore helpful.
Apart from the very basics for each and every business there can be further requirements for some businesses, such as VAT calculating and reporting to HMRC, payroll for employed staff, bank reconciliations and other industry specific tasks.
Each business will have slightly different requirements both in terms of what sort of book-keeping they need to run in their business – e.g. VAT registered or not? And also, possibly business specific records such as stock control.
One very important and often over-looked task is credit control. Credit control is the task that ensures that your customers pay on time and keeps the cash flowing into the business. What if your customers don’t pay on time? This causes business cashflow problems and the business is not in a good financial position.
Possibly the business owner is not the best person to carry out this task for a number of reasons. The business owner relationship with the customer is more of a sales role. You want to obtain business but also build a good ongoing relationship. It is so much better if another person carries out the task of credit control. It does require a certain amount of confidence and toughness, whilst being polite, to get clients to pay on time. You should not be put off by excuses but follow through until they pay. I would strongly advise out-sourcing credit control to keep your financial position healthy.
Each business may also differ in how they keep these records. It would make sense to use accounting software right from the beginning. Further information available here . There are many software packages available and most offer a free trial. You can then try before you buy to see which one you prefer.
A start-up will understandably be reluctant to spend any money that is deemed unnecessary at the beginning. A spreadsheet could be used instead. However, for the small cost involved it really is worthwhile just to set up in the beginning on a basic package. This will save time and a lot of stress later on.
Every business in the UK will need to keep books up to date and accurate – this is book-keeping. The choice, as a business owner, is whether you are going to do the books yourself or to outsource the work.
Most business owners hate all things book-keeping, and more importantly correctly believe that it is really not a good use of their time. Much better to be working on the business and developing profitability.
When looking to outsource the book-keeping tasks try to be clear in what you require. What the specific tasks will be and how much you’re prepared to pay. If you are currently doing your own books, then take the time to make notes on what you are doing and how long it takes. This will help when you are looking to outsource.
The role of the Accountant is to prepare the year-end accounts and to give you tax advice. Bookkeeping is not the role of the Accountant. Some larger accountancy practices will also offer book-keeping by a specialist team. They may also outsource to freelancers. You can obtain a quote for this from the outset as it can be expensive.
There are many freelance book-keepers available. Some will work the hours required at your premises. Others will be virtual and work from their own offices or homes on cloud-based software. The best way to find what you are looking for is to keep the Find a Book-keeper page on our website here
There are many other articles all aimed at helping both business owners and book-keepers or potential book-keepers. Please do visit www.bookkeepingforveryone.co.uk where you can find everything you need to know about book-keeping.