What is bookkeeping and how can it help my small business?
Bookkeeping is an essential part of running any business, large or small. But what exactly is it? What do bookkeepers do? And what are the benefits of doing your company’s bookkeeping yourself versus opting for bookkeeping services for your small business? Read on for all your questions about bookkeeping answered.
What is bookkeeping?
Bookkeeping is the process of recording every financial transaction that a business makes. This includes keeping track of all payments, expenses, direct debits, income and assets and carefully recording and organising them with the aim of ‘balancing the books.’
Balancing the books essentially means making sure that the amount your business owes is equal to the amount that your business owns.
This can be checked using a simple formula: Assets = liabilities + equity.
Don’t worry, it’s not as complicated as it sounds!
Assets: Your business’ assets are the tangible things that your business owns, such as cash, furniture, vehicles or even your company’s office.
Liabilities: Your business’ liabilities are what your business owes. For example, business loans, bills or invoices from suppliers all count as liabilities.
Equity: Shareholders' equity (also known as stockholders' equity). Capital is the amount of the business that you and/or any other investors own, such as retained and current profit available.
By making sure that your business’ liabilities and equity are equal to its assets, you can be sure that your business is financially healthy.
What is the difference between bookkeeping and accounting?
Bookkeeping and accounting are two sides of the same coin. Bookkeeping is the process that happens before accounting. Without it, accounting simply wouldn’t be able to take place.
In a nutshell, bookkeeping involves recording the transactions your business makes and organising the documentation that goes with them, like receipts and invoices. Accounting involves taking this information, analysing it and using it. For instance, preparing your business’ year-end financial statements and completing your Company Tax Returns.
Can you do bookkeeping yourself?
Yes! In fact, a lot of business owners start off by saying they’ll do their bookkeeping themselves.
By doing your own bookkeeping, you’ll be forced to look closely at your company’s transactions. You’ll get a better idea of where your company’s money is going and you might start to see useful patterns emerging that could help you to spot new opportunities or make changes.
That said, bookkeeping is time-consuming and requires discipline. Every week or month, you’ll need to sit down and dig out all the receipts, invoices and other financial documents that have been issued or received from across your whole business, and cross-reference them with your bank statements.
While it’s absolutely something that you can do yourself, bookkeeping is also something that can easily be outsourced. By opting for bookkeeping services, you can save valuable time that could be better spent generating money for your small business and help it grow.
What does a bookkeeper do?
Professional bookkeepers will take on the labour-intensive tasks of recording and reporting on your business’ transactions so that you don’t have to.
This involves keeping track of your ingoings and outgoings, balancing your business’ books, organising invoices and receipts, and producing monthly reports to keep you up-to-date with your company’s financial situation. If your business needs it, it can also involve creating and chasing invoices on your behalf and making sure that invoices from suppliers are paid in a timely manner.
At Day’s Accountancy Services, we can work with you using a variety of bookkeeping tools to make things as easy as possible for you. For instance, if you use QuickBooks, you can issue all your quotes and invoices via an app, review your linked bank account and snap images of your receipts when out and about. By adding us to your account, we can see all your transactions and monitor your business’ financial performance in real-time on the go or via a computer in the office.
This way, you can save a great deal of time and admin and we can help you make more informed decisions about when you’re in a position to make purchases, such as acquiring new equipment or business vehicles.
What are the benefits of bookkeeping services for a small business?
Processing your invoices and receipts is time-consuming. By outsourcing your bookkeeping, you can instead concentrate on doing what you do best – generating income and growing your business.
At Day’s Accountancy Services, we call this the value-added principle:
You could spend a day in the office sorting through invoices, receipts and payments. Or, you could engage us to complete your bookkeeping on your behalf. We are experts in the field and reviewing your accounts on a regular basis allows us to provide you with ongoing value-added support and advice. The time it takes us to process your paperwork is likely to be less than you take to complete the job.
We spoke to a Builder recently and explained that we would not know where to start building a wall. It would take us three times as long to prepare and the job would not be as good. By engaging their services, we would have a lovely wall in a fraction of the time it would have taken us.
The same thing applies to bookkeeping. You could do your bookkeeping yourself. Or, you could engage us to reconcile your accounts and input your receipts so that you can spend your time doing things that will win you more business – like raising quotes, chasing outstanding payments or even just calling your clients for a catch-up!
On top of this, using a professional bookkeeping service for your small business will give you that peace of mind that your accounts are being done properly. Not only will you have a better idea of the position your business is in throughout the year, but it’s likely to make your year-end accounts a lot quicker too, ultimately saving you money on your accounting.
Whether you choose to do it yourself or to hire a bookkeeping service like Day’s Accountancy Services, one thing’s certain. Bookkeeping is an essential part of running your small business. It helps you understand your business’ financial performance, manage your cash flow, comply with regulations and get your finances in order ready for your accountant.
Looking for bookkeeping services in Stamford? Or keen to work with a bookkeeper remotely? We offer bookkeeping services in Stamford and remotely across the UK, all tailored to the needs of you and your business. Just get in touch for a free consultation to see how we can help.