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Small Business Bookkeeping Basics

Small Business Bookkeeping Basics

Bookkeeping basics are at the centre of all your small business accounting reports. Without the basic bookkeeping, you will not be able to keep control of your company finances and produce useful management reports. There are two different types of accounts you can use, these are single-entry bookkeeping and double-entry bookkeeping.

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Bookkeeping Basics - why is it so important?

It is easy to forget to complete bookkeeping basics while you are so concerned about getting the sales and delivering the goods or services on time. However, it is important. If you do not keep your basics of small business bookkeeping up-to-date, you may miss invoicing a customer, forget to chase up payment or end up paying bank charges if you go overdrawn.

Moreover, remember, whether you are self-employed or Incorporated at Companies House, it is a legal requirement to keep accounting records and store them for a minimum of six years.

Bookkeeping Basics: how to get started

If you have never done bookkeeping before, you may find a couple of simple books helpful to get you started with the basics. Here is a couple we recommend to get you up to speed with all the basics:

These books are targeted at people who need to learn the basics without being swamped with too much bookkeeping information. The books are simple to read, present their information in a simple way and are a useful ongoing source of reference.

How often does bookkeeping need to be completed?

Decide how often you require your small business bookkeeping and accounting records. It may be that you prefer to do little and often, maybe each day set aside some time to ensure that your small business bookkeeping basics records are up-to-date. A simple five minutes each day can be a lot easier to manage than half a day of headache at the end of each month.

If you are VAT registered, your business will need to provide sales and purchase history when the VAT return needs completing.

Your bookkeeping will be used to provide business accounting basics reports - Financial accounts and management accounts. These accounts will help both you and other people make financial decisions regarding your business. The more up-to-date your books are, the better handle you will have on your business.

Small Business Bookkeeping Basics tips

If you are already up to speed with bookkeeping basics, but in need of some tips to help you, here are a few tips to keep your books up-to-date:

  • Post all your bookkeeping transactions on a regular basis - 'little and often' is a lot easier than batching everything up. It will save you both time and money - especially at the year end.
  • Post all your expenses, however little they may seem. Each one will affect your profit and how much tax you pay.
  • Keep it simple - there are lots of tools available to help you. Simple Excel spreadsheets and accounts software now make keeping your records simple and give you all the management information you need at the touch of a button. Find a system that works for you and stick with it.
  • Reconcile your bank - this ensures all your sales and purchase transactions are posted. If you don't already have a computer system to help you with this, download our free Excel spreadsheets templates for cash book.
  • Reconcile your petty cash - if you keep petty cash, it is so easy to forget small amounts that you have spent. If you want some help with this, download our free, simple to use Excel spreadsheets templates for petty cash.
  • If using double-entry bookkeeping - ensure that if you make an entry on one account you will need to make another entry on a second account. One example of this is if you receive a payment you will need to increase your bank and decrease your accounts receivable (customers).

Small Business Bookkeeping Tasks

There are many small business tasks which need to be completed for business bookkeeping. We have produced guides with the basics on each topic;

  • Bank Reconciliation Basics

    The basics of bank reconciliation, why it is so important and how complete it?
  • Claiming Business Expenses

    What business expenses you can reclaim and free Excel expense form template.
  • Credit Control Basics

    How to request money and improve your cash flow of your business.
  • Depreciation Accounting

    The basics of how to calculate depreciation and the different methods to depreciate fixed assets.
  • Fixed Asset basics

    Includes fixed asset accounting, software, tracking and how to value fixed assets.
  • How to account for Payroll

    Information on how to account for payroll including double-entry bookkeeping and options available for running salaries in your business.
  • Journal entry in accounting

    Double entry bookkeeping requires two entries to the accounts. If a correction needs completing a journal entry will be required. Examples and templates for journals including accruals and prepayments are available.
  • Petty Cash basics

    The basics of petty cash, how to implement procedures, fill in vouchers, books and forms also includes a free Microsoft Excel petty cash template.
  • Purchase Invoice basics

    How to record purchase invoices, pay your invoices, file supplier invoices and manage your cash flow.
  • Sales Invoice basics

    How to set up Sales Invoices, the basics which needs to be included on a customer invoice, how to file your sales invoices and free Excel invoice templates / free Word invoice templates.
  • What is stock control?

    A guide on how to record, track and value stock. Download our free Microsoft Excel stock control sheet.

Where can I learn bookkeeping basics?

If you wish to learn the basics of bookkeeping, there are a few alternatives: reading books and running through training exercises is a good way to get you up to speed with the basics relatively quickly.

Alternatively, there are several courses available - from bookkeeping for beginners, A-level Accounting or the more advanced accounting qualifications such as ACCA or CIMA.

Talk to your local college or look in your local library for bookkeeping and accounting courses. In the long run, if you are planning to do all your bookkeeping yourself, this may save you time and money.

Even if you are not planning to do your small business bookkeeping yourself, it is worth spending time learning the simple bookkeeping basics yourself so that you can understand the basics of the bookkeeping records created for your business.

What about handing my bookkeeping over to someone else?

Handing your small business bookkeeping over to a professional bookkeeper or accounting technician can be a useful way of freeing up your time and getting a professional to provide you with your management accounting information.

There are lots of people out there who could assist you with your business bookkeeping. It can be difficult to choose the right person; it is always worth asking local companies for a recommendation.

How can basics of bookkeeping be completed?

There are several options:

Paper Records

If you don't want to use a computer system, you can use some simple bookkeeping forms.

There are ledger books you can buy which will help, or you could start your own books. If you are after bookkeeping stationery for your manual records, Amazon can provide you with everything you need.

However, you will find that paper-based records are more time-consuming to complete and will not give you the same flexibility as a computer system when compiling management accounts.

Excel Spreadsheets

If you are looking for some simple basic bookkeeping forms, there are Excel bookkeeping templates which will enable you to complete simple accounts. We have produced a range of simple to use free Excel spreadsheets templates to help keep your books up-to-date.

Business Bookkeeping Software

There are many bookkeeping packages available, such as QuickBooks and Sage. There are even free bookkeeping software downloads, including Microsoft Office Accountant Express Edition. Have a look at our business accounting software review section for more information.

Are you thinking of starting a home based bookkeeping business?

We've written a free bookkeeping basics guide to help people who are considering starting a home based bookkeeping business.

Written by a qualified accounting technician who has run a home-based bookkeeping business, the guide looks at the benefits and disadvantages of running your own bookkeeping business, how to find customers and how to price yourself correctly. Read our guide on how to start a bookkeeping business.

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