Bookkeeping is a key part of running a business. In fact, unless the books are completed regularly then nothing else can be done. If you don’t keep on top your bookkeeping, then how will you know how much money you are making? How will know your upcoming debt obligations to suppliers or HMRC for VAT and PAYE and so on?
Remember, cash in the bank does not equal profit. Profitability is determined by lots of things, not just how much cash you have to hand. It is possible to have cash in the bank but not be generating profits in the books.
Having a clear understanding of who owes you money and who you owe money to is crucial to successful cash flow management. Further, it is important to ensure that your VAT return is accurately prepared and that you claim everything you are entitled to as well as ensuring that you pay everything you should.
Accurate and timely bookkeeping is also essential in calculating profits and consequently any dividends to shareholders as well as any corporation tax payable. To understand your profitability, you will need to know both the cost of goods or services sold (purchase invoices) and the revenue from the sale of those services or goods (sales invoices) and then ensure that the bank reflects those amounts, i.e., have you paid your bills, and have you received payment for your invoices?
There is far more to profitability than just those examples and some tasks will be undertaken by your accountant once the bookkeeping has been completed to calculate how much you have made. For example, there are potential balance sheet implications for any company loans or capitalisation/depreciation/amortisation of assets as well as payroll reconciliations amongst other things that need to be done.
This is where your bookkeeper comes in. They will focus on the accounts so you will not have to worry about these things. You can instead focus on your strengths – running your business and looking after your customers.
If you want to build a successful, sustainable, and profitable business then in our view, it is crucial that you employ the services of a competent bookkeeper using the latest cloud-based accounting systems. It is highly likely to cost you an awful lot more in the long run if you try to muddle through on your own. With the advent of Making Tax Digital, it is no longer feasible to use an Excel spread sheet to do the books and calculate and submit your VAT returns. By using a dedicated bookkeeper you can stay up to date with ever changing compliance requirements and save time and money.