Reasons to love bookkeeping

Bookkeeping plays a key rĂ´le in every successful business. Without accurate books you have no idea how well or otherwise you are doing financially. You may feel good about your business but you don’t know that financial ruin isn’t just around the corner.
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Choosing a suitable year end

Your year end or accounting date is the date to which your accounts are usually made up. You should choose this within a few months of commencing trading. Many businesses set this to 31/3 (or 5/4) to tie in with the tax year (ending 5/4) but many retailers choose 31/12 to tie in with the calendar year and to better fit the typical retail trading cycle. Your first set of accounts, made up to this date, are unlikely to be for exactly one year but more likely from 6 to 18 months. Subsequent accounts will be for exactly 12 months until you cease trading or change your year end.
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Will your first tax bill put you out of business?

In recent years, failure to budget for payment of that first tax bill has put more sole traders out of business than any other single cause. If you make a profit, you will have to pay tax and it could well be for a lot more than you think so please don’t be in denial about this!
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What is bookkeeping?

Bookkeeping is the process of recording all the financial transactions connected with your business. It should include all money coming in and going out, who owes what to whom and what your business physically owns or capital.
Bookkeeping is not accounting. Accounting starts where bookkeeping leaves off. So accountants look at reports created from your bookkeeping records to, say, complete your tax return or draw up your year end accounts etc. Unlike accounting which happens perhaps just once a year bookkeeping is an ongoing operational and analytical tool providing essential feedback on the financial health of your business.
Well kept books form the cornerstone of a well run business, a fact that is not lost on venture capitalists and other sources of credit. They are necessary whatever the financial climate but absolutely essential when times are tough and credit difficult to acquire. Banks are much more likely to lend to businesses which are demonstrably well run. Good bookkeeping exemplifies this.
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Why do bookkeeping?

Keeping an accurate record of all your business transactions is a legal requirement. So “to bookkeep or not to bookkeep” is a bit of a no brainer since you could well end up being detained at her majesty’s pleasure if you don’t!
Whilst bookkeeping readily lends itself to being viewed as a bureaucratic chore, it should really be utilised as a powerful navigational tool for your business. It’s your financial compass and like it’s nautical counterpart essential for your survival. Reporting for tax then is a mere by-product of this system, not an end in itself. Put another way: let’s reclaim bookkeeping from HMRC and use it for ourselves. Take ownership of bookkeeping and you take ownership of your finances and therefore your business.
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A simple filing system for invoices

This is a minimal filing system for sales and purchase invoices that nonetheless sorts out paid from unpaid. It’s a lot better than the carrier bag approach and the only equipment you need to run it are four box files!
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