Your Business With James Caan 2017 - 72
It all adds up
Keeping track of your business accounts is vital, but it doesn't have
to be taxing. Here's what you need to know about bookkeeping
he science of bookkeeping is
quite simple - it's essentially the
recording of ﬁnancial transactions
within a business, and as such is
part of the accounting process.
For a small one-person start-up,
this could be as straightforward as
recording transactions as you pay
bills and make deposits into your
bank account. The system is more
involved for larger businesses or
enterprises that are likely to grow
quickly, but the end game is the same.
Bookkeeping isn't the same as
accountancy. Whereas a bookkeeper
keeps a log of ﬁnancial transactions
(either on paper or electronically), an
accountant takes those records and
analyses them, prepares reports and
interprets any ﬁnancial information
on behalf of the company.
One of the ﬁrst decisions you'll need
to make is whether to use single- or
double-entry book keeping. The former
is a simple system where you record
transactions in a revenue and expense
journal every time you pay a bill or
receive income. Double bookkeeping
involves making at least two entries for
each ﬁnancial transaction - a debit to
one account and a credit to the other.
This system is best for medium or large
companies with more complex needs.
Here we take a closer look at what's
involved in bookkeeping - and how
to help you avoid costly mistakes.
BILLING FOR GOODS/SERVICES SOLD
When you sell a product or service,
you need to raise an invoice to send to
your client. The details of this should
be recorded in a journal or daybook.
It's essential to log every receipt
that passes through your business.
It's good practise to make notes on
receipts as to their business purpose,
especially for entertainment and dining
expenses. And don't get rid of them
once you've claimed - expense receipts
need to be kept for six years, or ﬁve
if you're a self-employed sole trader.
Scan your receipts and back them up
online to reduce paperwork - you
don't need to keep a paper copy.
suppliers are veriﬁed. Put simply, the
"budget holder" - or person in charge
of that bit of the business - should
conﬁrm that those goods were received
and match the goods ordered, that the
price is correct and that the invoice adds
VERIFYING AND RECORDING
INVOICES FROM SUPPLIERS
doesn't have to
be done on paper.
There are plenty of
to make life easier
You should have a system in place
whereby all invoices received from
LETTING IT ALL PILE UP
Do a little bit of bookkeeping
every day to keep on top of things.
NOT HAVING A BUSINESS
Keeping track of your finances using
your personal bank account will
up. If a purchase order was sent, this
should be matched against the invoice.
Once these checks have been made, the
invoice can be approved for payment.
make life difficult.
NOT KEEPING BANK
STATEMENTS IN ORDER
It's a simple task, but fail to keep
things in order and you may miss
statements at the end of the year.
NOT HAVING A
You should have separate files
for paid and unpaid invoices, and
make sure you keep them in
It all adds up, so make sure
you keep every business receipt,
however small the amount.
Suppliers can be paid by cash, cheque
or card, or electronically. Payment
terms must be within 30 days of
the invoice being received, unless a
diﬀerent payment date has been set.
PROCESSING EMPLOYEES' PAY
If you have employees, you need to keep
an account of their pay - including sick
pay and other things such as maternity
or paternity pay - in your payroll.
Most businesses need to operate PAYE,
and your employees' payments and
deductions need to be reported to HM
Revenue & Customs every month.
WORDS: TRACEY LATTIMORE | PHOTOGRAPHY: SHUTTERSTOCK
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