The Importance of Bookkeeping in a Business

If you run your own business, no matter what size, bookkeeping is a legal requirement by H M Revenue and Customs.

Basic records you must keep

Your basic records will normally include:
a record of all your sales, with copies of any invoices you've issued
a record of all your business purchases and expenses
invoices for all your business purchases and expenses
details of any amounts you personally pay into or take from the business
copies of business bank statements You or your accountant will use these records to create a profit and loss account - which shows the sales income you've received and the expenses you've paid, and what profit/ loss you've actually made. Your tax liability will be based on this.

Other records you must keep

All businesses are different and there are many specific types of detailed records that may need to be kept. Some examples of records you should keep include:
cash book
petty cash book
order notes and invoices
copy sales invoices
details of any other business income received
details of any private money brought into the business
till rolls or other form of electronic record of sales
details of any other income
any cash taken out of the till to pay small business expenses
bills and invoices for purchases and expenses
a record of stock on hand at the end of the year
all bank and building society statements, pass books, cheque stubs and paying-in slips which include details of business transactions If you do not keep accurate and complete records you may end up paying more tax than is due because of lack of evidence of tax deductible expenditure or/and inaccurate sales records causing H M Revenue and Customs to assess your expected sales . If you pay an accountant to prepare your accounts they will charge you based on how long it will take them. If your records are more accurate this will reduce the time taken and therefore reduce the amount they charge.

The above reasons are sufficient to ensure you keep good books and records but the most important reason is to ensure you have control over your business and that you can assess its profitability and the cash flow situation therefore ensuring you are aware of any potential problems as soon as possible and can make business decisions with all available information at hand.

Alan Butler is a director of A Butler and Company, chartered certified accountants, based in Derby, providing a personalised service to local business owners and individuals.