You’ll have to take on several hats as the owner of an online business, and (for more or less) bookkeeping is among the most important. The flow of cash is an important factor in the most well-known start-ups’ fatalities; therefore, getting your books in order is an obligation that is not negotiable. If monitoring the management of your revenue and expenses seems daunting, you’re certainly not alone. Nearly three-fourths of small-business owners don’t feel comfortable understanding bookkeeping or accounting, but it doesn’t have to be this way.
Is it bookkeeping?
Bookkeeping is the practice of keeping track of the company’s financial transactions (in and out) by recording them digitally using the Tax Return Accountants in London. The financial data provides insight into the areas where you’re spending your money and how your company earns money. Furthermore, having detailed accounting records helps make tax season easier.
Four reasons why bookkeeping is essential
If you don’t have a proper bookkeeping system, you’re merely directing the wheels of your eCommerce business. It is essential to have financial information to determine (and confirm) your strengths and weaknesses, threats, and opportunities. Decisions made by businesses without financial data are the only speculation.
Recognizing tax deductions
Up-to-date, accurate Self Assessment Tax Return Services In London is the key to a relaxed tax time. The meticulous financial records you keep will allow you to identify and use all the tax deductions available to small businesses, which can mean more money for you. Bookkeeping can also help calculate your tax burden throughout the year, ensuring you don’t have surprises in April.
The process of obtaining a business loan
The ability to track your transactions digitally allows you to produce quickly pertinent financial statements, such as the profit and loss report, the balance sheet, profit and loss statement, and cash flow report.
Be aware of bank errors and fraud.
The bookkeeping process doesn’t stop the possibility of fraud but will notify you of when something has occurred. Without accurate documentation, vendors could alter their records, or employees may use business credit cards to commit fraud -which would leave you not aware of it. Additionally, banks don’t always do the best job; they’re not perfect all the time, and they’ll make mistakes also. Current books can help you fix any errors that may be present.
Create a clear and concise image of financial health
Through bookkeeping, you’ll have a quick overview of the financial condition of your business. You’ll know how much money you’ve got, how much you owe, and what trends could be in front of you. Nothing can be more convincing to your business’s performance than well-documented books.
How to manage bookkeeping (the correct method)
If you’re going your time in bookkeeping, you must ensure that you’re doing it correctly. Doing the right things, in the beginning, will keep your books from becoming an unproductive mess.
Separate your personal and professional financials
If you can, you can open a business bank account and separate the personal and business financials. Combining your finances can make it difficult to keep track of your earnings and expenses. A separate account is a great way to track your expenses and create financial reports and track your tax deductions. When tax time comes around, it won’t be a matter of debating whether the IKEA cost was for an office chair or your living furniture for your living room.
Choose a bookkeeping system.
Single-entry bookkeeping is an easy and simple method to keep track of your outflows and inflows. Simply note each transaction as an income expense and then subtract the cash balance. Double-entry bookkeeping tracks every transaction across two accounts, one debit and the other credit, to ensure that your earnings, expenses, and liabilities correspond properly.
Note down (and keep) everything.
Make sure you record each transaction, large or small, either recurring or one-time. This includes the coffee you purchased using the company’s dollars when you travelled on business. Label your expenses using clearly defined tags that allow you to track trends of your money’s movements.
Options for outsourcing
When bookkeeping seems not your forte, then hire an experienced bookkeeper. Bookkeepers can reconcile your books on your behalf and categorize your transactions, and present real-time financial statements. Another option to outsource is to use a virtual bookkeeping service. It’s likely to cost more, but you’ll benefit from working with a group of experts, not just one person.