Learning how to manage your books can be daunting when you\u2019re just starting a new business and navigating the world of self-employment.<\/p>\n\n\n\n
In time you might choose to hire an accountant, but here\u2019s an overview of what bookkeeping is, and our tips for getting it right.<\/p>\n\n\n\n
Bookkeeping is an important part of business finance, but is often one of the most challenging parts of running your own business.<\/p>\n\n\n\n
You probably didn\u2019t choose to go self-employed because you enjoy looking at spreadsheets and recording your expenses. You’re happiest when you\u2019re out there doing what you do best, whether that\u2019s running your craft business<\/a>, selling clothes online<\/a>, or providing a first-rate service to your customers.<\/p>\n\n\n\n Bookkeepers are required to keep an accurate record of business costs and expenses<\/strong>. Not only does this help with understanding the profitability<\/a> of a business, but it\u2019s necessary when it comes to filing your tax return as part of the Self Assessment<\/a> process each year.<\/p>\n\n\n\n Bookkeeping also involves processing invoices<\/a>, reviewing bank statements, chasing up any unpaid invoices<\/a>. Some businesses also send customers a statement of account<\/a> if they have multiple invoices due.<\/p>\n\n\n\n Accounting and bookkeeping are two terms that often get confused in business finance as they can overlap.<\/p>\n\n\n\n Bookkeeping is the day-to-day administration tasks that keep track of the money your business receives and the money it spends.<\/p>\n\n\n\n Accounting is a high-level form of business finance as it looks at the financial health of a business through reports and forecasts.<\/p>\n\n\n\n Accounting tasks usually include auditing, analysis, and financial reporting, for example creating a balance sheet<\/a> to report on assets and liabilities or doing a cash flow forecast<\/a>. These reports provide a more analytical view of your business and can be useful when it comes to making important business decisions.<\/p>\n\n\n\n Not sure where to start when it comes to balancing your books? Here are our five top tips.<\/p>\n\n\n\n First, you\u2019ll need to choose an accounting method for your business: cash basis accounting or traditional accounting<\/a>. What\u2019s best for your business will depend on how you\u2019ve set it up, so it\u2019s best to talk to an accountant if you\u2019re unsure.<\/p>\n\n\n\n The size of your business will probably determine how you want to organise your financial admin. There are many different free and paid for accounting software options<\/a> out there, but you might be happy with a simple Excel spreadsheet.<\/p>\n\n\n\n The main thing is that everything is organised and you\u2019re filing your invoices, bank statements, and receipts in order.<\/p>\n\n\n\n You need to keep your business records for at least five years after the Self Assessment deadline. Limited companies need to keep accounting records for at least six years. Our guide to record keeping<\/a> has more details on this.<\/p>\n\n\n\n You can subtract some of your self-employed expenses<\/a> from your turnover when working out how much tax you\u2019ll need to pay each year. Make sure you\u2019re not one of the small businesses that are losing thousands on unclaimed business expenses<\/a>, whether that\u2019s due to losing receipts or not understanding what you can and can\u2019t claim.<\/p>\n\n\n\n It can be tricky to know how much tax you\u2019ll owe HMRC by the time the Self Assessment deadline comes around on 31 January, but it\u2019s important you\u2019ve budgeted enough money to pay the bill.<\/p>\n\n\n\n If it\u2019s your first year in business, be aware that you\u2019ll have to pay that years\u2019 tax bill and then, on the same day, also pay the first instalment of the next year\u2019s bill \u2013 this is called payment on account<\/a>.<\/p>\n\n\n\n Download our free budget template for your business<\/a>.<\/p>\n\n\n\n If you\u2019re struggling with bookkeeping, it\u2019s worth considering whether you want to hire an accountant and free up your time for running your business.<\/p>\n\n\n\n Alternatively, you could explore basic bookkeeping qualifications like this one at City & Guilds<\/a> to build your knowledge.<\/p>\n\n\n\n If you\u2019re looking to improve your confidence and develop your bookkeeping skills, we\u2019ve listed a few online bookkeeping courses you can try for free. It\u2019s also worth seeing if you can access any free resources with your bookkeeping software (if you use one) as some do include training and support.<\/p>\n\n\n\n OpenLearn is a free learning platform from the Open University and they offer an Introduction to Bookkeeping and Accounting<\/a> for free.<\/p>\n\n\n\n FutureLearn offers a range of free accounting courses that you can complete in your own time from anywhere in the world. Here\u2019s a few related to bookkeeping:<\/p>\n\n\n\n Finally, it goes without saying that YouTube is a fantastic way to teach yourself something new \u2013 and bookkeeping is no different. Have a browse and let us know how you get on.<\/p>\n\n\n\nWhat\u2019s the difference between bookkeeping and accounting?<\/h2>\n\n\n\n
How to do bookkeeping<\/h2>\n\n\n\n
1. Choose an accounting method<\/h3>\n\n\n\n
2. Create a system and organise everything<\/h3>\n\n\n\n
3. Know how long to keep your financial records<\/h3>\n\n\n\n
4. Claim back tax on allowable expenses<\/h3>\n\n\n\n
5. Budget for your tax bill<\/h3>\n\n\n\n
Bookkeeping courses for small business owners<\/h2>\n\n\n\n
Free bookkeeping courses (UK)<\/h3>\n\n\n\n
OpenLearn<\/h4>\n\n\n\n
FutureLearn<\/h4>\n\n\n\n
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YouTube<\/h4>\n\n\n\n