Bookkeeping is the standard term used in business for the recording and organising of daily financial transactions, in a systematic and accurate manner. For those just entering into the world of business, they will need to ensure that they have fully functioning and efficient accounting practices before they even begin trading, if not, the business will quickly begin to suffer.
Bookkeeping and accounting go hand in hand, but if you have no up to date and accurate bookkeeping system, then the accounting system will ultimately fail. Accounts are prepared from the information provided from the bookkeeping records, and so it’s vital that every transaction, whether it’s purchase or sale, be recorded accurately and in a way that they can easily be deciphered.
For every purchase or sale, there must be a coinciding document pertaining to that transaction, and this could be a sales invoice, sales receipt, supplier invoice, supplier payment, bank payment or journal. These documents can be described as an audit trail and are essential as part of maintaining accurate records should your business be subject to an audit.
Double entry bookkeeping:
This system of bookkeeping involves transactions that have two parts, and which therefore require two ledger accounts. Each transaction has a debit entry in one account and a credit entry in another, serving as an effective system for detecting errors should they occur. It’s then easy to tell if the sum of debits doesn’t match the corresponding sum of credits.
Do you handle your own bookkeeping?
Many smaller businesses feel as if they have a responsibility to handle their own bookkeeping duties, and many do not like the thought of having to pay for the services of a professional bookkeeper. However, while in some cases this may work well – and usually if the person has a sound knowledge of bookkeeping – often small business owners find themselves struggling to keep the records up to date and manage the rest of the business and employees
at the same time. If you put your business head on, this doesn’t make a lot of sense. While it’s true that the services of a professional bookkeeper do not come for free, what they may end up saving you in both time and money, is a no brainer. Not only that, but your stress levels will automatically reduce and you may even find that fact alone helps you to focus more on your business and build a stronger plan of action.
Day to day bookkeeping can take up a lot of time, especially if you want to do things properly and you don’t have a specific knowledge of bookkeeping skills, and usually there will be something else within the business that owners would prefer to spend their time focusing on. Hiring a bookkeeper will give you the peace of mind to shift your focus, and you won’t have the worry of records not being accurate or timely, and when it comes to tax time – the most stressful time in many business owners’ lives – you can simply sit back and twiddle your thumbs!