You can claim many things, including office supplies, travel expenses, etc. By understanding these deductions, you can keep more of your hard-earned money in your pocket and avoid overpaying your taxes.

Claiming allowable business expenses can save self-employed individuals a significant amount of money. These deductions reduce taxable income, ultimately allowing them to retain more earnings.

What Qualifies as Expenses for Self-Employed

Generally, an expense must be necessary and directly related to your business purposes to be deductible. Personal expenses, such as mortgage payments or grocery bills, cannot be deducted. However, many allowable business-related expenses, including office supplies, travel costs, and marketing expenses, can be deducted.

So long as an expense is for business purposes only and directly related to generating income, it will likely be deductible. As a result, keeping track of your business-related expenses throughout the year is vital to maximising your deductions come tax time.

How can I reduce my Self Assessment Tax bill by Claiming Expenses?

You must complete a self-assessment tax return yearly if the turnover is over £1000. Complete the tax return to calculate how much income tax and national insurance you owe.

As a Sole trader or freelancer, you must pay tax on everything over the personal allowance. By reducing the profits, the tax bill will be lower. It is essential only to claim what is allowable.

Below is an example of how it works using the personal allowance for 2023-2024 or 2024-2025, which is £12,570.

Sales throughout the tax year are £30,000, and you can claim business expenses of £8,500, with a tax allowance of £12,570.

The taxable profit is £30,000 – £8,500 = £21,500.

You would, therefore, pay 20% tax on £21,500 less tax allowance. £21,500 – £12,570 = £8,930.

If your profits are more than £12,570 a year, you must pay Class 4 National Insurance contributions. 6% on profits of £12,570 up to £50,270 – 2% on profits over £50,270.

See our self-employed tax calculator for an estimate of how much tax you will pay.

Self-Employed Allowable Expenses List UK

Here is our top 10 list of common business expenses.

1. Accommodation
2. Bank Charges
3. Business Mileage
4. General office supplies
5. Home Office
6. Insurance
7. Legal and Professional fees
8. Marketing
9. Materials
10. Subscriptions

What Expenses can I claim?

Below are further details and instructions on how to claim other business-allowable expenses. The rule to remember is: Is it an allowable expense for the business to make a profit?

Accommodation Expenses

You can claim accommodation expenses if you do overnight business trips. If you are using the accommodation for business and personal reasons, you can only claim the percentage related to the business expense.

For example, you need to stay overnight for business meetings but decide to stay for an extra night. The extra night is not an allowable business expense.

Bank Charges

Self-employed individuals can often deduct charges and overdraft fees on their accounts and business loans from their taxable income. The include:

• Bank overdraft and credit card fees
• Transaction fees
• Fees for bank and business loans

The maximum interest and bank charges claim is £500. You can’t claim for loan repayments, only the interest.

Business Mileage

You can claim business mileage if you use your vehicle for business purposes. The current mileage rates are 45p per mile for the first 10,000 miles and then 25p per mile. However, you can’t claim mileage to and from your standard place of work.

To claim business mileage, you must keep records of your journeys, including the date, start and end point, and the number of miles travelled. You must also indicate what business purpose the trip was for.

Mileage claims can be a valuable way to offset a business cost, so it is worth keeping accurate records if you use your own vehicle for business travel.

If you claim mileage, you can’t claim any other expenses for the car, including repairs, tax, MOT, parking fines and insurance. You also can’t claim mileage between home and an office or regular place of work.

Business Premises

Business premises allowable expenses that you can claim include:

• Rent
• Business Rates
• Utilities, including gas, water and electricity bills
• Security
• Cleaning

There are separate rules below if you work from home.

Business Travel

You can claim travel for business purposes. Travel might include:

• Trains
• Bus
• Flights
• Taxis

You can only claim travel and accommodation expenses related to the business.

Clothing

You can claim self-employed expenses for some work clothing. As per HMRC, it includes:

• Uniforms
• Protective clothing needed for work
• Costumes if you are an actor or entertainer

It does not include everyday work clothing.

If you are unsure if your clothing is allowable, read the guide on Enterprise Made Simple.

Eyesight Test and Glasses

Under health and safety, if you use a computer screen for a long time, you can reclaim the costs of an eye test.

There are more rules to meet when claiming tax relief for glasses or contact lenses. They need to be for the sole use of the business and not for personal use. If you are unsure if the cost is claimable, speak to an accountant.

General Office Supplies

As a sole trader, you can claim expenses on office supplies, including:

• Stationery
• Printing costs
• Software and software subscriptions
• Postage
• Phone, mobile and internet bills

Home Office

There are two methods for claiming self-employed expenses for home office use.

The first is a simplified method, and the details are further down. The second method is to work out the exact costs of the property, including:

• Rent
• Council tax
• Mortgage interest
• Internet and telephone
• Utilities

This method is more complicated, but you might claim more. To calculate how much you need to work out how much of the house is for personal and business use and how much time you spend working from home. Please read our full guide on home office expenses.

Insurance

Self-employed expenses include insurance premiums for running the business. The insurance that you may need to cover the company is:

• Employers Liability
• Professional indemnity
• Public Liability
• Travel – business purposes only

You can not claim personal insurance for any coverage if you are off sick.

Leasing Payments

Hire leasing payments are tax-deductible. A business might go down a leasing route for many reasons rather than buying equipment outright, including initial cost and getting up-to-date equipment.

Both the hire purchase interest and the amount for the equipment are allowable.

Legal and Professional costs

Most businesses require professional, legal and financial costs. Tax allowable expenses include:

• Legal fees
• Accountants
• Bookkeepers
• Surveyors

Marketing Costs

Marketing costs can be a valuable way to offset business costs, so it is worth keeping accurate records if you use your funds for marketing.

It includes advertising costs, websites, promotional materials, and other associated expenses. Tracking these expenses carefully is vital to claiming the maximum amount possible when tax time comes.

Materials

When you purchase materials or stock for the business, these are deductible as a cost of sale on the income statement. Depending on the accounting method you use will depend on when they go into the cost of sale.

Cash basis – You record the materials when you spend the cash.

Traditional accounting – The figure is recorded when it is used. If you purchase materials in advance, they are classed as stock for the business and transferred as a cost when used.

Office Equipment

There are two different rules for claiming business equipment costs; these are:

Cash Basis Accounting – You claim the allowable expenses when you pay them.

Traditional Accounting – You use capital allowances, which allow you to reclaim the entire cost of the asset. The equipment is posted to fixed assets in the balance sheet in the accounts and decreased using depreciation over its useful life. Depreciation is not an allowable expense.

Salaries

As a self-employed person, you can’t take a salary; instead, you can take drawings from the business and pay taxes on the profits.

You can, however, employ staff and claim allowable expenses on the following:

• Wages
• Bonus
• Tax
• National Insurance
• Pension costs (see below for personal pension)

Subscriptions

You can claim expenses for various subscriptions related to your work. Subscriptions might be to a professional body for a licence to complete your job. The subscription organisation must be included in the HMRC-approved professional list.

Simplified Expenses

Rather than claim a proportion of home office expenses, there is a simplified expense method, where you can claim a fixed amount per month depending on the hours worked at home.

HMRC sets the rates and are as follows:

We have created a calculator, which is helpful if you work different hours from home each month.

Expenses you Can’t Claim as Self-Employed

The rules are complicated for self-employed, and some items are not tax-deductible, including:

Your Salary

As a sole trader or freelancer, you take drawings from the business and pay taxes on the business’s profit.

Personal Insurance

With the risks involved in being self-employed, you might take out personal insurance coverage such as income protection, life and critical illness. However, these are not claimable through the business.

Pension

Your pension is classed as a personal expense and, therefore, is not tax-deductible.

Assessment Tax Bill

You will complete a self-assessment tax return at the end of the tax year. Part of this is a calculation of how much tax you owe, a personal tax not paid through the business. The taxes include income tax and national insurance contributions.

Entertaining and Hospitality

You can’t claim event hospitality or entertaining clients, suppliers and customers.

How can you keep track of your expenses throughout the year to ensure that you’re taking advantage of all the tax breaks available to you?

There are several ways to keep track of your sole trader business expenses. The most important thing is to keep receipts for everything and make sure you categorise them so you can easily find what you’re looking for later. You might want to consider using accounting software to help you keep track of your expenses, or you can use a simple spreadsheet.

Accounting Software

As a self-employed individual, keeping track of your business expenses is essential. This not only helps you stay organised, but it can also save you money come tax time.

Accounting software makes it easy to track expenses, and many programs now offer mobile apps that allow you to record mileage and other business expenses on the go.

Claiming business expenses can be a complex process, but it can be a breeze with the right accounting software.

One advantage of using a good accounting software package is that it includes submitting the tax return online.

Expense Software

Pleo expense software is an excellent option for self-employed individuals because it allows you to claim expenses and get reimbursed quickly and easily. Plus, it integrates with popular accounting software like Xero and QuickBooks, making it easy to keep track of your finances.

Excel Bookkeeping Templates

It’s essential to keep track of your business expenses. One way to do this is by using Excel bookkeeping templates to track expenses.

At Business Accounting Basics, we have created 21 Excel templates to assist with small business accounting tasks. Some of the best ones for claiming expenses are:

Home Office Expenses

This spreadsheet will help calculate home office expenses.

Simplified Expenses Calculator

To simplify things, use the simplified expenses calculator. Enter the number of months worked at each rate, and the calculator will calculate the year’s total.

Business Expense Template

You might pay for some of the expenses personally and then claim them back as a self-employed person. Our expense spreadsheet allows mileage and other costs to be recorded.

Mileage Claim Form

The mileage claim form allows the recording of actual mileage with details of the journey.

Speak to an Accountant

If you are unsure about self-employed expenses, you can always speak to an accountant. Our information is for a guide only but provides an excellent starting point for determining the allowable expenses you can claim.

Conclusion to claiming Self-Employed Allowable Expenses

As self-employed, you can claim many allowable expenses to offset business costs and reduce your income tax bill. Keep accurate records of your mileage and business travel to make the most of the tax breaks available.

You can also claim home office expenses, subscriptions, and other related items. Remember that some clothing and equipment may be claimed as allowable expenses, but everyday work clothes cannot be deducted. Speak with an accountant if you have questions about what is and isn’t deductible.

Disclaimer: The content of this website is based on our understanding of the rules. You should always seek the guidance of an accountant if you are unsure of what allowable expenses you can claim.

The post Self-Employed Allowable Expenses appeared first on Business Accounting Basics.

Whether you are a sole trader, partnership or Limited Company, you may feel it’s easier to handle their finances in-house; hiring a professional bookkeeper can save you time, money, and stress. In this blog post, we will discuss seven reasons why outsourcing your bookkeeping is an intelligent choice.

Below, I’ve explained the top 8 reasons to outsource your bookkeeping, as well as advice for finding a bookkeeper and completing bookkeeping yourself.

1. Focus On What You’re Good At

The main reason why you should outsource bookkeeping services is that it allows you to focus on what you’re good at. Everyone has their speciality, and letting someone else take care of the bookkeeping gives you more time and energy to put into yours.

In most cases, that won’t only be less frustrating for you but also help you grow your business. This is because every part of your business will have a specialist working on it. This will increase efficiency and productivity, ultimately resulting in higher profits.

You work on what you’re good at, and a bookkeeping specialist keeps the books. It’s like having an extended team to complete some of the tasks.

2. Scalability

Your energy is limited. You can’t do everything in your business.

That’s why, to scale, you must outsource bookkeeping or hire an internal team to work on it. Otherwise, other business areas will lose out, and you won’t be able to scale.

However, hiring staff is usually not the best option for small business owners.

3. Staff

If you don’t want to outsource bookkeeping, your other option is to hire and train staff. However, this requires an incredible amount of effort from you, but it can often be quite costly and inefficient.

This is because you’ll have to hire someone for a certain amount of hours which usually ends up being more than you need. You’ll also have a lot of additional supervising responsibility compared to if you were to outsource your bookkeeping.

That being said, for very specific types of businesses (which we’ll talk about later on), hiring an internal team may be the right option.

4. It Provides Access to Expertise – Credibility

A qualified bookkeeper will have a professional accounting body membership, which has standards that they must follow. They will also register under Anti-money laundering. When you take on any bookkeepers or accountants, check their registration with accounting bodies.

Bookkeepers have a unique understanding of accounting and tax laws that many small business owners do not possess. By working with an experienced bookkeeper, you can benefit from their knowledge, expertise and precise records.

5. It Increases Security and Privacy

Sensitive financial information needs to be kept secure, which can challenge small businesses with limited resources. By outsourcing your bookkeeping to a professional, you can ensure that your financial information is being managed in a secure, centralised location. This can help prevent data breaches and other security issues.

6. Outsourced Bookkeeping Increases Accuracy

Bookkeeping requires high accuracy, as even minor errors can have significant consequences. By outsourcing your bookkeeping to a professional, you can trust that your finances are being managed with great attention to detail, which can help prevent costly mistakes.

7. Outsourced Bookkeeping Saves You Time

One of the most significant advantages of outsourcing your bookkeeping is that it frees up your time to focus on other areas of your business. Bookkeeping is a time-consuming task that requires a high level of attention to detail. By handing this responsibility to a professional bookkeeper, you can trust that your finances are in good hands and have more time to focus on growing your business.

8. It saves you money.

If you outsource bookkeeping, you can also save money in the long run. By hiring an experienced bookkeeper, you can ensure that your finances are being managed properly, which can help you save money on taxes and avoid costly mistakes. Additionally, outsourcing can eliminate the need for an in-house bookkeeping department, saving you money on salaries and benefits.

These are our top 8 reasons for outsourcing bookkeeping, but you may have other reasons as well.

Why You Might Not Want To Outsource Bookkeeping

To give you the full picture, I also wanted to explain why you might choose not to outsource your bookkeeping.

Privacy – Although privacy was also on our list of reasons to outsource, it can also work vice-versa. If your business works with private clients and provides a confidential service, you may not be allowed to share their names or details with other organizations. In this case, you may need to go for an internal solution. However, you may also be able to discuss with your clients and add it to your terms to share some information with your bookkeeping company.

Control – If you use an internal solution for keeping your books, you have more control over them. If that’s important to you or for your type of business it would make sense to avoid outsourcing.

Communication – Another reason you might want to avoid outsourcing bookkeeping is that communication may be limited compared to an internal option. For example, if you work with a 3rd party accountant, sending an email and getting a response may take a couple of days. On the other hand, if you have an employee, you can communicate with them much faster.

FAQ

Should I Outsource Accounting Services Separately?

There is a difference between bookkeeping and accounting services. A bookkeeper will complete the day-to-day transactions and produce reports. An accountant will use these reports to produce year-end accounts, complete a tax return, offer financial advice, and strategic planning, and perform a complete range of accounting functions.

If you want both services, it may be worth outsourcing them separately to get the best service from each area and be more cost-effective. However, outsourcing bookkeeping alone can still provide significant benefits if your small business does not require complex accounting services.

Check on the bookkeeper’s experience to see if they can offer tax advice and submit tax returns. Outsourced accounting can be an excellent option for businesses that need more comprehensive financial services.

How Do I Choose the Right Bookkeeping Service?

When looking to outsource your bookkeeping, it is essential to consider factors such as experience, qualifications, and reputation. Look for bookkeeping services with experience working with businesses similar to yours and a proven track record of delivering accurate and timely financial reports.

It may also be beneficial to read reviews and ask for referrals from other company owners who have outsourced bookkeeping services.

Can I Manage My Own Bookkeeping?

While it is possible to complete your own bookkeeping, it can be a time-consuming and complex task. If you choose to handle your own bookkeeping, ensure you have a good understanding of accounting principles and stay organised to avoid costly mistakes.

The best way to complete business bookkeeping is to use accounting software. It will help keep all the financial information in one place and make it easier to track income and expenses.

However, for many business owners, outsourcing bookkeeping is more efficient and cost-effective, allowing them to focus on other business areas. Whether or not to outsource bookkeeping will depend on individual business needs and resources. So, weigh the pros and cons carefully before making a decision.

How Much Does Monthly Bookkeeping Cost in the UK?

How much a bookkeeper will cost varies based on your requirements.

Some of the factors that decide how much a bookkeeping service would cost include:

• Experience of the service provider
• How complex your business is
• Your turnover
• Location

For example, if you own a freelancing business that usually provides a service to the same clients with little cost, your bookkeeping needs would be quite basic. On the other hand, if you own a national store with a high turnover, lots of expenses, employees, etc., it would take the bookkeeper much longer, meaning the costs would be higher.

Generally, in the UK, the costs can range anywhere from £30 per month to £1000 per month. It all depends on the turnover, transactions, etc. Outsourced Accountants are usually more expensive than bookkeepers, so it is worth checking the services you require from each provider.

Where Can I Find a Bookkeeper?

There are several options when you are looking to outsource accounting or bookkeeping, including:

• Accounting software – most provide a directory like QuickBooks certified bookkeepers
• Recommendations – Speak to other businesses that have outsourced their bookkeeping for a recommendation
• Directories – Check local and national directories and then look at reviews
• Google Search – find local bookkeepers in your area
• Job boards like LinkedIn – Look for experienced freelancers offering accounting and bookkeeping services.

Conclusion:

Using outsourced bookkeeping services is a wise decision that can help you save time, money, and stress while also providing access to expertise and increasing accuracy and security. By working with a professional bookkeeper, you can rest assured that your finances are in good hands, allowing you to focus on growing your business.

If you’re considering outsourcing accounting and bookkeeping, look for a reputable provider with experience working with small businesses in your industry. With the right partner, outsourcing your bookkeeping can be a game-changer for your business.

The post Reasons To Outsource Bookkeeping Services for Small Business appeared first on Business Accounting Basics.

This blog post will discuss virtual bookkeeping and how it can benefit your small business. We’ll review its limitations and practical tips for getting started with virtual bookkeeping. We also give some ideas on how to create your own bookkeeping business.

So, whether you’re just starting to look into solutions or are already comfortable navigating through finances, this post will provide helpful advice about making the most out of virtual accounting services for your small enterprise!

What Does a Bookkeeper Do?

A bookkeeper is responsible for maintaining accurate financial records for a company. This includes keeping track of all financial transactions, such as purchases, sales, receipts, and payments. They organise this information into financial statements, such as income statements or balance sheets. A bookkeeper also reconciles bank accounts and ensures that all financial reports are up-to-date and accurate.

A common misconception is that bookkeepers are the same as accountants. While both roles deal with a company’s finances, some key differences exist. Bookkeepers typically handle day-to-day tasks, such as recording transactions, while accountants analyse financial information to help a business make informed decisions.

What is Virtual Bookkeeping and How Does it Work?

Virtual bookkeeping is a bookkeeper who works entirely online. They perform the same functions as a traditional bookkeeper, including handling accounts payable and receivable, recording transactions, producing financial reports, and reconciling bank statements. However, they do this remotely, which can help small businesses save time and money.

Working with a virtual bookkeeping practice is similar to working with an in-house bookkeeper, except all communication and file sharing happens online. This means a business can hire a bookkeeper from anywhere worldwide if they can access a computer and the internet.

Roles and Responsibilities of Virtual Bookkeeping

The specific roles and responsibilities of virtual bookkeeping can vary depending on the needs of a particular business. However, some typical tasks that virtual bookkeepers might handle include:

• Managing accounts payable and accounts receivable
• Data entry of financial transactions in software
• Preparing and sending invoices
• Reconciling bank and credit card statements
• Producing financial reports for an accounting period, such as profit and loss statements and balance sheets
• Reconcile accounts at the year-end
• Managing payroll and employee expenses
• Tracking inventory and orders
• Liaising with an accountant for the accounting services that you do not offer

Virtual bookkeepers can also handle other bookkeeping tasks, such as preparing tax returns or managing cash flow. Additionally, they can provide financial insights and recommendations to help a business make informed decisions.

The Benefits of Virtual Bookkeeping

There are several benefits to working with a virtual bookkeeping practice, including:

• Cost savings: Working with a virtual bookkeeper can be more cost-effective than hiring an in-house bookkeeper. You don’t have to provide office space, equipment, or benefits.
• Flexibility: A virtual bookkeeper can work from anywhere, so they can be available to a business outside regular office hours.
• Expertise: Many bookkeepers are often highly skilled and experienced professionals. They can provide valuable financial insights and recommendations to help a business grow.
• Accuracy: Virtual bookkeepers use advanced bookkeeping software to help ensure accuracy and reduce the risk of errors.

The Limitations of Virtual Bookkeeping

While a virtual bookkeeper can be a valuable resource for many business owners, there are some limitations to consider:

• Lack of in-person interaction: Because a virtual bookkeeper works remotely, there is no face-to-face communication. This may make it harder to build a strong relationship and communicate effectively, especially if there are language or cultural barriers.
• Dependence on technology: A virtual bookkeeper relies heavily on technology to perform their job. Technical issues with the software, internet connectivity problems, or other issues can disrupt their work and cause delays.
• Security concerns: Because virtual bookkeepers work with sensitive financial data, security risks must be managed carefully. Ensuring that data is stored and transmitted securely is essential to prevent data breaches and protect the privacy of sensitive information.
• Limited on-site support: Virtual bookkeepers are not physically present in the office, which means they may not be able to provide on-site support if there are issues requiring in-person assistance.

Despite these limitations, many find that the benefits of working with a virtual bookkeeper outweigh the potential drawbacks. By carefully evaluating your business’s needs and the services a virtual bookkeeper can provide, you can make an informed decision about whether it is the right choice for your company.

Suitable businesses for a virtual bookkeeping

Virtual bookkeepers are suitable for businesses of all sizes, but they are especially beneficial for small businesses. This is because small businesses often have limited resources and may not have the budget to hire a full-time bookkeeper. Working with a virtual bookkeeper allows them to get the support they need without stretching their budget.

Tips for Getting Started With Virtual Bookkeeping

If you are considering working with a virtual bookkeeping business, here are some tips to help you get started:

1. Define your bookkeeping needs: Before you start looking for a bookkeeper, you should clearly know what you need help with. This might include managing accounts payable and receivable, reconciling bank statements, or preparing financial reports. By defining your needs, you can find a bookkeeper with the right skills and experience to meet them.
2. Research potential bookkeepers: Look for virtual bookkeepers with experience working with similar businesses. Check their credentials and ask for references from other clients. You may also want to consider working with a bookkeeping service that employs multiple bookkeepers, as this can provide more support and flexibility.
3. Set clear expectations: Once you have chosen a bookkeeper, discuss your expectations and needs with them in detail. This might include communication preferences, project timelines, and tasks they will be responsible for. By setting clear expectations, you can ensure everyone is on the same page and avoid misunderstandings.
4. Use cloud-based accounting software: A virtual bookkeeping provider will need access to your financial data, so it’s essential to use online accounting software that can be accessed from anywhere. This will make it easier for your bookkeeper to perform their duties and ensure they work with the most up-to-date information.
5. Establish communication protocols: Since your bookkeeper will be working remotely, it’s essential to establish clear communication protocols. This might include scheduled check-ins via phone or video conferencing, email updates, or instant messaging.

By following these tips, you can get started with virtual bookkeeping and ensure you get the most value from your bookkeeper.

How to Set up Your Own Online Bookkeeping Services

Setting up your own online bookkeeping services business can be a rewarding and profitable venture. Here are the steps you can take to get started:

Experience and Qualifications

Gain experience and qualifications: To set up a bookkeeping business, you need to have some experience and qualifications in bookkeeping and accounting. This could include taking a bookkeeping course or getting a degree in accounting. You can also gain experience by working for a bookkeeping service or an accounting firm.

AML Regulations

Get AML certification: As a bookkeeper, you must comply with anti-money laundering (AML) regulations. You can get certified by being a member of an accounting body like AAT or IAB; you can also apply directly with HMRC.

Insurance

Insurance is essential in case of any errors or omissions in your bookkeeping work. You can purchase professional liability insurance, which will protect you in case of any financial losses your clients might suffer due to negligence.

Set up your Own Virtual Bookkeeping Business

Register your business with HMRC for self-employed or Companies House for a Limited Company. Open a business bank account; although this is not required for self-employed, it is recommended.

Finding Clients

You can use online job boards, such as Upwork and Fiverr, to find clients or advertise your services on social media. Setting up a website with details of your services is an excellent way to find potential clients. Also, look for bookkeeping work in your area, advertising bookkeeping jobs.

Online Bookkeeping Software

Choosing bookkeeping software that is cloud-based, user-friendly, and capable of handling all the tasks your clients might need is essential. Some popular software packages include QuickBooks, Xero, and FreshBooks. They all offer trials and training.

Define your services

You should define your bookkeeping services based on your skills, experience, and your clients’ needs. Some common bookkeeping services include accounting software setup, account reconciliation, tax preparation, and financial reporting.

Set your pricing

You should set your pricing based on the services you offer and the market rates in your area. You can charge by the hour, by the project or offer fixed monthly retainer packages.

Paperwork

When setting up a bookkeeping business, it’s important to have a clear contract with your clients outlining the scope of services you will provide, how you will be compensated, and any other important terms and conditions. This can help prevent misunderstandings and ensure that you and your clients are on the same page.

Alternatives to Virtual Bookkeeping

Other options are available for those who may not be comfortable with virtual bookkeeping. One of these is to hire a local bookkeeper or accountant to manage your finances. This can provide the convenience and security of having someone on-site to review your books.

Another option is to do your own bookkeeping manually or use accounting software such as QuickBooks. Doing it yourself can save you money but requires patience and attention to detail to do it correctly.

Whichever route you choose, make sure you understand what’s involved before deciding how best to handle your financial records.

Virtual Bookkeeping Conclusion

In conclusion, virtual bookkeeping is a valuable resource for a small business looking to stay on top of their small business finances without breaking the bank.

By working with a virtual bookkeeper, businesses can save money, gain valuable expertise, and benefit from flexible, remote support. With the right tools, clear expectations, and careful management of security risks, businesses can enjoy the benefits of an online bookkeeper while minimising potential drawbacks.

The post What is Virtual Bookkeeping? appeared first on Business Accounting Basics.

Whether you’re managing online sales or an online store, chances are you’ve encountered some difficulties with keeping accurate books. Don’t worry – help is here! In this blog post, we will discuss the basics of eCommerce bookkeeping and provide practical advice on setting up and maintaining accurate financial records. If you want to learn more about how to ensure that all your monetary transactions are properly tracked – read on!

What is an eCommerce Business?

An eCommerce business is an online business that uses technology, such as the internet or mobile devices, to conduct transactions and provide services. Examples of eCommerce businesses include web-based retail stores, digital content providers, online payment processors, and service providers who use websites or apps to offer their services.

Some of the popular eCommerce platforms include:

• WooCommerce on WordPress
• Wix eCommerce
• Shopify
• eBay
• Etsy
• Squarespace

Depending on your business will depend on the best platform. For some, an all-in-one easy-to-set-up is an ideal solution. For a larger business having a website developed and payment platforms set up is a better solution.

Why is Bookkeeping Important for E-commerce Businesses?

Bookkeeping is an essential part of any business, including eCommerce businesses. It’s important to keep accurate financial records because it allows you to track the income and expenses of your business, as well as monitor any changes in your cash flow.

Accurate bookkeeping also helps you stay organised and makes filing taxes easier. Additionally, accurate financial records are invaluable if you ever need to apply for a loan or attract investors.

How Do You Set Up an e-Commerce Bookkeeping System?

The first step to setting up a bookkeeping system for your e-Commerce business is to choose which method of record-keeping you prefer. You can opt for manual or digital methods depending on your preferences and business needs. The options include:

Paper Based Ledger

It involves entering all financial transactions into a paper ledger and recording it in an orderly manner. There are ledger books available to purchase. This method is only suitable for small businesses not planning to expand.

Excel Spreadsheets

This method uses a computer spreadsheet program such as Microsoft Excel to record financial data. This method is simple and easy to use but requires some technical knowledge. We have created over 25 Excel templates for free download, including a cash book.

Accounting Software

This method requires the use of computer software to record and monitor financial data. Examples include Xero, FreshBooks, QuickBooks and Sage Accounting. We will look at this in more detail later and discuss the advantages that using bookkeeping software has.

Inventory Management

Keeping track of your stock or inventory is extremely important in business. A good eCommerce business must always be aware of its inventory to maintain a healthy balance between supply and demand.

This is key for managing cash flow since being overstocked, or understocked can create disruptions in the order-to-payment cycle. Inventory tracking also helps businesses recognise issues related to shrinkage and wastage, both of which can lead to major financial losses if not properly managed.

Having an accurate understanding of stock levels enables e-commerce businesses to make informed decisions when making timely acquisitions or investments in future products. With proper bookkeeping and record keeping, an e-commerce business’s inventory will always be well-managed and ready for success.

Using a good bookkeeping package with the facility to track inventory can help you keep track of your stock levels at all times. This will make it easier to identify any issues quickly and take action if needed.

The bookkeeping process for an eCommerce business is not difficult, but it does require some careful consideration. It’s important to establish the best processes early on to ensure that you can keep accurate records and produce accurate financial statements.

For smaller businesses, you can use a manual stock control system. We have developed stock record cards to help you get started.

Recording e-Commerce Transactions

e-Commerce Bookkeeping includes tracking income and expenses, sales, payments, returns, etc. All transactions should be recorded accurately and in a timely manner to ensure your financial statements are accurate.

One of the questions I often see for new businesses is how to record eBay or Paypal transactions. For each transaction, a fee is taken for the service. This fee should be recorded and accounted for separately from the actual transaction amount.

When recording transactions in your bookkeeping, make sure to record the gross amount as income. An example is a receipt from the provider is 77.00, but that includes a processing fee of 2.00. The actual sales are, therefore, 79.00 with a transaction fee expense of 2.00.

This is essential as it accurately records the income and expenses of the business.

The most important thing to remember is that accurate bookkeeping is essential for any business’s success. Having complete and up-to-date records of all financial activities makes it easier to review the overall performance of your business.

eCommerce Bookkeeping Software

An e-Commerce business owner will need to take time to choose the best accounting software for their needs. Every accounting software accounting package is different and offers a different level of features available.

Below are a few features to look at:

Invoicing

The invoicing feature allows you to create and send invoices quickly and efficiently. This will help you manage customer accounts, track payments and ensure that you receive payment promptly. If you are only using an e-commerce platform, you may not need to raise manual invoices.

In WooCommerce, plugins are available to issue an invoice after an order is complete.

Inventory Management

As mentioned previously, keeping track of your inventory is critical for managing cash flow. There are many different inventory management programs available both online and offline.

Online systems are often more comprehensive and have the ability to integrate with other e-commerce platforms. This allows you to manage your inventory across multiple channels, including web stores and marketplaces.

Accounts Receivable

Accounts receivable is a crucial element of bookkeeping for any business. It involves tracking customer payments and following up on outstanding payments. Most accounting software packages include features to help you manage this process more efficiently.

Accounts Payable

Accounts payable is the opposite of accounts receivable and involves tracking payments that your business must make. Again, most accounting software packages have features for managing this process more effectively.

Business Reports

In order to understand how your business is performing, you need to have access to key financial reports. Financial statements such as Profit and Loss, Balance Sheet and Cash Flow statement provide insight into the performance of your business.

Financial forecasting

Financial forecasting, including a cash flow forecast, involves predicting future revenue and expenses based on current trends. This can be useful for planning for the future.

We also provide a free cash flow forecast template in Excel.

Additional apps and features

The above features are standard in most accounting software packages, but if you use different e-commerce platforms, you may need additional apps or features.

For example, if you are using PayPal, Stripe or Square for payments, specific PayPal, Square and Stripe apps are available to integrate with your accounting software. This makes it easier to track transactions across all platforms.

Below are a couple of options worth looking into:

Xero

Xero is one of the best bookkeeping software packages available for eCommerce businesses to track their financial data. As well as providing an easy-to-use platform with bank and credit card imports, there is a range of external add-ons available to integrate with your account to import your eCommerce bookkeeping data.

FreshBooks

FreshBooks is an easy-to-use accounting software package that includes invoicing, accounts receivable, expense tracking and detailed reports. It also offers integrations with eCommerce platforms with its income importer app.

QuickBooks Online

QuickBooks is a great choice for eCommerce businesses. It supports multiple sales channels, integrates with popular eCommerce platforms and offers features such as automatic bank feeds and automated invoicing.

NetSuite

NetSuite Suite Commerce is a great choice for ecommerce business owners that are looking to grow. It offers advanced features such as inventory tracking, multi-channel orders and stock control. It also integrates with popular eCommerce platforms such as Shopify, eBay and Amazon. Wherever the customer shops, you can integrate with it.

Additional e-Commerce Business Apps

So far, we have looked at accounting packages, but there are also additional apps designed for the purpose of recording external platform payments. Some of these integrate with bookkeeping software, while others work stand-alone.

Synder

It connects to multiple payment processors, including Square, WooCommerce, Strip, PayPal, Amazon, Shopify, Wix, Etsy and more. It is designed to work with multiple channels.

Pricing starts from $11 per month for 50 transactions, but you can save that in the time it will take to enter the transactions manually.

Synder connects with Xero, FreshBooks and QuickBooks and is also a stand-alone package for your business bookkeeping.

Open Payout

Open Payout is a great app for tracking payments across multiple channels, including Shopify, Wix, Etsy, WooCommerce and Squarespace. It is an easy-to-set-up system.

The starter plan starts from £8 per month for 75 transactions.

Dext Commerce

Dext Commerce works with Xero and QuickBooks and is aimed at bookkeepers and accountants. If you are using a bookkeeping service, they might include it in the monthly fee.

The single client starts from £31.23 per month but includes 1000 transactions and it integrates with multiple payment processors, including PayPal, Stripe, Amazon, Woo and Stripe.

Can I Complete Bookkeeping for my e-Commerce Business?

Yes! It is possible to complete bookkeeping for your e-Commerce business. Depending on your business’s size and the transactions’ complexity, you may need to utilise certain apps or bookkeeping software packages. The key is to find the right one that suits your needs and budget.

Once you have chosen a suitable system, ensure you are consistent with data entry, as this will help to keep your books organised and up-to-date. Don’t forget to reconcile all transactions periodically so that you can spot any discrepancies and rectify them in the most efficient time frame possible.

For a larger business, you might want to employ a bookkeeping or accounting team to ensure all records are accurate and up-to-date. it can work out cheaper than using external bookkeeping services.

Why Use eCommerce Bookkeeping Services?

Using bookkeeping services is the best way to ensure accurate financial records and accounts. With a bookkeeping service, you can be sure that your business finances are handled efficiently and accurately.

Bookkeepers will look after things such as invoicing, accounts receivable, list reconciliation and more. This ensures that all of your data is accurate and up-to-date so you have peace of mind that everything is running properly.

Bookkeepers can also help with forecasting, budgeting, cash flow management and tax planning. They will make sure that all transactions are correctly recorded in accordance with accounting principles and filing deadlines. In addition, they can provide valuable insights into how to improve processes for better efficiency and profitability.

eCommerce Bookkeeping Conclusion

Overall, it’s important to understand the importance of bookkeeping for an eCommerce business. With a reliable and accurate system in place, you can easily track your finances and ensure that all data is up-to-date and accurately filed with HMRC.

You will also have access to valuable insights into how you can improve processes for better efficiency and profitability. Whether you choose an accounting package or additional apps designed specifically for tracking external platform payments, make sure it fits your business needs as well as budget.

Additionally, if necessary, consider engaging professional bookkeepers who are experienced in handling complex transactions related to eCommerce businesses. Doing so ensures that everything is done correctly from the start. This could save time, money and headaches when filing taxes or dealing with legalities associated with running an online store.

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Many businesses track their cash outflows to see where their money is going and manage their finances more effectively.

In this article, we will look in detail at the different types of cash outflow, how to track it, cash forecasting and how you can improve cash outflow.

Why is Cash Outflow Important for Businesses to understand?

A positive cash flow is needed to continue operating when you are planning business growth.

Cash flow is the movement of money in and out of the business. Outflow is when money is going out. If a business has more cash outflow than inflow, it will eventually run out of money and have to close its doors. This is why it’s so crucial for businesses to understand their cash flow and take steps to improve it.

Several things can cause poor cash flow, such as not invoicing customers timely, having too much inventory, or having too much debt. By understanding what causes cash outflow, businesses can take steps to improve their net cash flow and ensure their long-term growth.

How do Businesses Track their Cash Outflow?

Businesses track their cash outflow in several ways. The most common method is through financial statements. These statements can be generated manually or through accounting software. Some Accounting software packages allow you to monitor the money spent and produce a cash flow forecast. One example is QuickBooks.

Excel spreadsheets or Google sheets are also commonly used to track cash flow. There are templates online already formatted to track cash inflows and outflows. We have a free template available; details are included in this post.

In addition, businesses may use specific software for managing cash flow. This software is designed to help businesses monitor and manage their cash flows. The most popular software includes:

• ForwardAI Predict – Includes a free plan and integration to some accounting software. Ideal for small business owners
• CashFlowTool – Includes a free plan for a four-week forecast. Works with QuickBooks
• Float – From £33 per month, simple cash flow software that integrates with several accounting software providers

Tracking cash outflow is essential for businesses of all sizes. It helps businesses ensure that the operating activities are within their budget and make informed financial decisions.

What Are Some Common Examples of Cash Outflow?

There are many different examples of cash outflow. Common cash outflow includes: making a purchase, paying wages, paying bills, paying dividends, buying office supplies, fixed assets and loan payments.

Many businesses also have regular expenses, including rent and car payments, that contribute to their monthly cash outflow.

These expenses can add up quickly and make it difficult to keep track of all the money going out each month. However, by carefully tracking your spending and being aware of your regular cash outflow, you can help ensure that your finances are on track.

How can businesses reduce their cash outflow?

Every business, regardless of size or industry, faces the challenge of managing its cash flow. Too much cash outflow can lead to financial instability, while too little can stunt a company’s growth and even lead to bankruptcy. Below are some methods businesses can use to reduce their cash outflow and help maintain a healthy bank balance.

Review regular expenses and try to negotiate a better rate

One of the best ways to save money is to review your regular costs and try to negotiate a better rate. This can be done with everything from your phone bill to materials. Many companies are willing to give their best customers a break on their rates, so it never hurts to ask.

Another way to save money on regular expenses is to look for discounts. Many companies offer discounts like setting up automatic payments or signing up for paperless billing. By taking advantage of these discounts, you can save a significant amount of money over time.

Finally, don’t be afraid to shop around for better rates. If you’re not happy with the rates you’re currently paying, there’s no reason to stay with that company. There are plenty of other suppliers out there who would love to have your business. By shopping around, you can ensure you’re getting the best possible deal on your regular expenses.

Reduce inventory levels

Businesses seek to reduce inventory levels for various reasons, including to increase cash flow, reduce holding costs associated with inventory, and free up storage space.

When businesses reduce inventory levels, they are also reducing the cash outflow needed to finance the inventory. Reducing inventory can be accomplished through several activities such as lowering production levels, increasing sales, or negotiating longer terms with suppliers.

In addition, businesses may choose to sell off excess inventory at a discount to reduce stock levels quickly.

Delay payments to suppliers where possible

By paying suppliers later, businesses can use that cash to pay other expenses or invest in new projects. Of course, this strategy only works if businesses have good relationships with their suppliers and can negotiate payment terms.

Otherwise, suppliers may be unwilling to provide goods or services on credit. In addition, businesses need to be careful not to delay payments too much, as this could damage their relationships with suppliers and cause them to raise prices in the future, or you may have to make interest payments.

What are the consequences of not managing cash outflow effectively

If a company is not managing its cash outflow effectively, it can lead to several consequences. One of the most serious consequences is that the company may not have enough cash to meet its obligations. This can lead to missed payments, loan defaults, and even bankruptcy.

Additionally, a company that is not managing its cash outflows may also find it difficult to obtain new financing, as lenders will be hesitant to extend credit to a business that appears to be struggling with its finances.

Ultimately, not managing cash outflows effectively can severely affect a company’s financial health.

Cash Outflow in Cash Forecasting

Cash outflow is a key part of cash flow forecasting, as it must be carefully managed to ensure the business does not run out of cash. To do this, businesses need to understand their regular cash outflow and plan for one-off payments in advance.

A cash flow forecast will show both inflow and cash outflow with a balance of how much cash the business has and helps to see any cash flow trends. It is essential if a business has a seasonal trade.

By doing this, businesses can avoid cash flow problems and ensure they have the cash available to meet their obligations.

Cash Flow Formula

The cash flow formula is used to calculate net cash flow. It is the total cash inflow minus the total cash outflow. The total cash inflow is all the money that comes into the company, such as from sales or investments. The total cash outflow is all the money that goes out of the company, such as for expenses, operating costs or loans.

Subtract the total cash outflow from the total cash inflow to calculate net cash flow. It will give you the net amount of cash flowing into or out of the company.

What are Positive Cash Flows?

Positive cash flow is when a company’s cash inflows exceed its cash outflows. Positive cash flow is essential for a company to grow and maintain positive cash flow. Positive cash flow allows a company to purchase new inventory, pay employees, and make other necessary investments.

There are several ways to generate positive cash flows, including invoicing customers promptly, reducing expenses, and selling excess inventory. Maintaining positive cash flow is essential for any company’s long-term success.

What is Negative Cash Flow?

Negative cash flow occurs when a company’s cash outflows exceed its cash inflows. This can happen for various reasons, such as investing in long-term projects or making large purchases. It can be a problem for companies because it can lead to a lack of working capital, which can, in turn, hamper business operations.

Negative cash flow can also put a strain on relationships with creditors and lenders. Companies can take out loans, sell assets, or raise equity capital to mitigate the risks. It is not always a bad thing; however, it can also signify that a company is growing and investing in its future.

Negative cash flows should be closely monitored so that it does not become a long-term issue.

Business Cash Flow Statement Template

If you are looking for a free business cash flow statement, we have produced a cash flow forecast here at Business Accounting Basics. It is easy to complete and helps to see how much cash you expect to have in the future. Full instructions are provided.

What is Cash Inflow?

Cash inflows are the funds that flow into your business, typically including money from accounts receivable or cash sales. In order to increase cash inflows, businesses typically focus on improving accounts receivable management. This can involve implementing effective billing and collections procedures, offering discounts for early payments, and extending credit only to customers with a history of timely payments.

By taking these steps, businesses can improve their cash flow and ensure that they have the funds necessary to meet their obligations.

Conclusion – What is Cash Outflow?

Cash outflows are an essential part of business cash flow forecasting. They need to be carefully managed to ensure the company has enough cash on hand to meet its obligations.

In order to generate positive cash flow, businesses should focus on reducing expenses, invoice customers promptly, and sell excess inventory. Maintaining positive cash flow is essential for any company’s long-term success.

Useful Articles

Statement of cash flows

How to improve cash flow

Financial Statements

The post What is Cash Outflow in Business? appeared first on Business Accounting Basics.

Bookkeeping isn’t just about numbers – it’s the foundation of your small business’s financial success. It’s about:

• Tracking your income and expenses
• Understanding your cash flow
• Making smart decisions that help your business grow

In this post, we’ll explain:

• How it can help you take charge of your finances
• What bookkeeping is, in simple terms
• Why it’s so important for your small business

Bookkeeping Definition

Bookkeeping systematically records all business financial transactions, including tracking income, expenses, assets, liabilities, and equity. It provides a comprehensive financial picture, essential for understanding a business’s profitability, cash flow, and overall financial health.

It involves invoicing, paying bills, preparing tax returns, monitoring key performance indicators, bank reconciliation, and offering advice.

Bookkeeping aims to maintain accurate records so that financial decisions can be made. This information is essential for business success. Accurate and up-to-date bookkeeping records are also necessary to file taxes, including self-assessment and VAT, apply for loans, and make sound financial decisions.

Difference Between Bookkeeping and Accounting

Bookkeeping is the essential process of meticulously recording all a business’s financial transactions. It is the day-to-day tracking of money coming in and going out, including sales, purchases, invoices, and payments. Bookkeepers focus on maintaining accurate and organised financial records, ensuring everything is categorized correctly and ready for further analysis.

Accounting, on the other hand, takes the information gathered through bookkeeping and transforms it into actionable insights. Accountants analyse the financial data, prepare financial statements, and advise business owners strategically. They help interpret the numbers, identify trends, and make informed decisions about budgeting, investments, and growth strategies.

Both bookkeeping and accounting play crucial roles in a business’s success. Bookkeeping provides the raw data, while accounting helps make sense of it all. Together, they ensure a business clearly understands its financial position and can make sound decisions for the future.

The Key Components of Bookkeeping

At its core, bookkeeping involves tracking your business’s financial ins and outs. Let’s break down the key components:

• Income and Expenses: This is the bread and butter of bookkeeping. Income represents all your business’s money from sales, services, or investments. Expenses, on the other hand, are the costs incurred to run your business – things like rent, salaries, utilities, and supplies. Keeping a close eye on both helps you gauge profitability and identify areas where you can cut costs or boost revenue.
• Accounts Receivable and Payable: Think of these as “IOUs.” Accounts Receivable track money owed to your business by customers for goods or services already delivered. Accounts Payable tracks money your business owes to suppliers or vendors for goods or services received. Managing both is key to maintaining healthy cash flow and avoiding late payments or collection issues.
• Reconciliation: This is where you compare your internal financial records with your bank statements. The goal? To ensure everything matches up. Discrepancies can arise from errors, unrecorded transactions, or even fraud. Regular reconciliation helps you catch these issues early, maintain accurate records, and clearly understand your financial position.
• Managing Payroll:

How to Get Started with Bookkeeping

Small business bookkeeping is an essential but often daunting task. You may be wondering where to start and what you need to do to keep your business finances in order. Fortunately, getting started with small business bookkeeping doesn’t have to be complicated or time-consuming. Here are a few simple steps to get you started:

1. Open a business bank account: This will help you keep track of your business income and expenses separate from your personal finances. If you are a sole trader, it is not a legal requirement but makes bookkeeping easier.

2. Set up your accounting system: There are several ways to set up your bookkeeping system, including:

Excel – If the business is simple, Excel might be a good solution. We offer lots of free bookkeeping templates to help you get started.

Bookkeeping Ledger Book – These are books with columns to record your financial transactions. This method is only suitable for very small businesses or charities with very few transactions.

Bookkeeping Software – Many bookkeeping systems, including free software, are available. Although bookkeeping software may have a learning curve in the long run, it might save lots of time. It is a double entry system, which means the accounts will always balance.

3. Keep track of your income and expenses: This includes income from sales and any expenses incurred.

4. Set up a filing system – HMRC requires paperwork to be kept for six years. Several options, including paper files and saving everything to the cloud or within the accounting software.

4. Hire a bookkeeper or accountant: If bookkeeping feels like too much of a daunting task, consider hiring a professional to help you out. If you are a limited company using an accountant to submit year-end financial records to Companies House is the best solution to ensure that they are correct.

What is Bookkeeping – Recording Financial Transactions

The entries are recorded in your accounting system when a business transaction occurs.

The entries might include sales invoices, business expenses, adjusting journals, bank payments and bank receipts.

The transactions in an accounting system can provide valuable insight into a company’s financial performance. Financial reports can help business owners make informed decisions about their business.

What are the Main Financial Reports?

Financial reporting is communicating financial information about a business to shareholders, creditors and other interested parties. The reports include the profit and loss, balance sheet and cash flow forecast.

Financial reporting is used to make financial decisions, assess performance, and measure financial risks. Financial ratios are often used in financial reports to compare a company’s financial performance with that of other companies in its industry or for previous periods.

We will now take a brief look at the three main reports.

Profit and Loss or Income Statement

A profit and loss statement (P&L) is a document that shows the financial position and how much money a company has earned over a specific period. Profit and Loss statements are divided into two parts: revenue and expenses.

Balance Sheet

A balance sheet is a financial statement showing a company’s assets, liabilities, and shareholders’ equity at a specific time. The assets are the things that the company owns, such as cash, property, and equipment.

Cash Flow Forecast

A cash flow forecast is a document that shows how much money a company expects to receive and spend over a specific period. A forecast is a helpful tool to see when to reinvest money back into the business, pay off debts, or make new investments. It can also help track trends and see where the company is making and losing money.

The Different Types of Bookkeeping Software Available

There are many options for different accounting packages, and it is difficult for business owners to choose the right one.

A few things to look for when choosing the best option are:

• Price – Small sole traders may not want to pay, but free options are available.
• Features – It is essential to choose a package with the required features, including professional invoices, inventory or stock management and payroll.
• Making Tax Digital – HMRC is introducing making tax digital (MTD). It means that businesses will need to use software to keep their records and submit tax returns. Ensure that the software you use is MTD compliant.
• Ease of use – The software needs to be easy to use. Check out the dashboard and how easy it is to add new transactions.

Free Accounting Software

Free accounting software is available and can save businesses considerable money. Free accounting software typically offers reduced features than paid options. Some do not provide an option to produce a sales invoice and have limited reports available.

Best Bookkeeping Software

Anyone who has ever tried to do their taxes knows that it can be daunting. Luckily, some paid accounting software programs can make the process much easier. It is worth looking at Xero, QuickBooks and FreshBooks

These programs provide users with professional invoices and financial statements, and they also use a double entry system to help ensure accuracy. In addition, many accounting software programs offer additional features such as tracking expenses and creating budgets.

Paying accounting software is well worth the investment for anyone who wants to take the hassle out of managing their finances.

Tips for Staying Organised while Keeping Your Books

When it comes to bookkeeping, staying organised is vital. There are a lot of small details that go into tracking your finances, and if you’re not careful, it can be easy to lose track of where you stand. That’s why it’s essential to have a system to organise your books and stick to it.

Here are a few tips to help you get organised:

Set up a bookkeeping process – The first step to staying organised is having a bookkeeping system. It will help you keep track of your finances and ensure that all of your records are included.

Keep proper financial records – To stay organised, you need to keep accurate records. This means recording all of your income and expenses and any other transactions that you incur.

Stay up to date – One of the essential aspects of bookkeeping is staying up to date. This means regularly reviewing your records and ensuring that all of your information is accurate. Nothing is worse than having to rush your accounts.

Accounts Payable – Accounts payable is one area where things can quickly get out of control. To stay organised, you need to have a system for tracking your expenses and ensuring that you pay them on time.

Sales Ledger – The sales ledger is another area where things can get complicated. To stay organised, you need to keep track of your sales and ensure that they are paid on time.

Common Mistakes Made in Bookkeeping and How to Avoid Them

If bookkeeping isn’t done correctly, it can lead to serious problems. Here are some common mistakes that are made in bookkeeping and how to avoid them:

Not keeping accurate records – This is one of the most common mistakes made in bookkeeping. If mistakes happen, it is possible to correct them by recording journal entries.

Not reviewing bank statements – This can lead to discrepancies and problems with your records. Always take the time to review and complete a bank reconciliation.

Failing to reconcile accounts – Reconciling your accounts in the general ledger is one of the most important aspects of bookkeeping. By failing to do this, you could end up with inaccurate records.

Not having a system – One of the best ways to stay organised is to have a bookkeeping system. This will help you keep track of your finances and ensure that all of your records are included

Leaving everything to the last minute – One of the worst things you can do is leave everything to the last minute, especially at the financial year-end. This will only lead to rushed work and inaccurate records. It’s important to take your time and double-check your work.

Mixing personal and business records – This is a mistake that can have serious implications. It’s important to keep personal and business transactions separate to avoid confusion.

Single Entry Bookkeeping

Single-entry bookkeeping is the most basic form of record-keeping for businesses. Under this system, each transaction is recorded only once, either as a debit entry or as a credit entry. It means that there is only one entry in the books for each transaction.

While single-entry bookkeeping is relatively simple, it can be time-consuming and leaves room for error. As a result, most businesses opt for double entry bookkeeping, which is a more sophisticated system. However, it can still be used effectively for small businesses and personal finances.

Double Entry Bookkeeping

Double entry bookkeeping is a system of accounting that ensures accuracy and allows for easy audits. Under this system, every financial transaction is recorded in at least two accounts. This will enable businesses to track both the inflow and outflow of funds, as well as to double-check their records for accuracy.

The double entry bookkeeping system has been used for centuries and is still the preferred method for many businesses today. While it may seem complicated at first, double entry bookkeeping is quite simple once you get the hang of it. With a bit of practice, you’ll be able to keep your books organised and error-free.

What is Financial Data

Source documents are the data that bookkeepers use to record transactions. The documents can include receipts, invoices, statements, and credit card statements. Source documents must be accurate and complete to provide an accurate record of a company’s financial activity.

What are Bookkeeping Services?

Many business owners find that bookkeeping services are a valuable asset. Outsourcing this task can save time and money while ensuring that their accounting practices are up to date. In addition, bookkeeping services can provide peace of mind and allow business owners to concentrate on running their businesses.

It is essential to find a reputable and reliable service for bookkeeping service. However, the benefits of doing so are well worth the effort. By outsourcing this important task, business owners can free up time and energy to focus on what they do best: running their businesses.

Bookkeeping Terms

Knowing bookkeeping terms is helpful whether you are handling your finances or someone else’s. We provide a comprehensive list of bookkeeping terms and their definitions. The bookkeeping terms listed on this site are presented in alphabetical order.

Conclusion to What is Bookkeeping

Bookkeeping is the process of recording financial transactions for a business. It can be done in various ways, but the most common is double entry bookkeeping. This system ensures accuracy and allows firms to track both the inflow and outflow of funds. By outsourcing this task to a professional bookkeeping service, business owners can save time and money while ensuring that their accounting practices are up to date.

Further Reading

For further information on bookkeeping, read the following articles:

Bookkeeping Basics

Bookkeeping Tips

The post What is Bookkeeping and Why Your Small Business Needs It appeared first on Business Accounting Basics.

1. Security

How safe are books or spreadsheets? Yes, you can protect them with a locked drawer or a password, but they are both very fallible forms of security. Accounting software will have built-in security, and you will know your data is safely stored and cannot be accessed.

You will also know you comply with GDPR and Data Protection regulations as you have to protect people’s personal data appropriately. We advise you to use carefully chosen passwords or 2FA (2-factor authentication) when available. Please see our blog on how to keep your data safe online for more details.

2. Access to Reporting

The beauty of software is that it has built-in reporting functions, and many have bespoke reports you can create as well. This enables not only end of year accounts to be far simpler but also you can gather data that will help you improve your business.

Being able to work out where revenue is coming from, track outgoings, see the average amount of time it takes clients to pay bills etc. can all be exceptionally helpful to you. Spreadsheets just can’t do that!

3. Fast Access to Data

The search function is amazing on accounting software, and you can find clients, invoices or purchase orders within a few simple steps, regardless of what years they are from. Searching on a spreadsheet or in physical books can take far longer. This can benefit you for business tasks or if you are on the phone with a customer you can access information straight away.

4. Securely Backed up Data

Your data will be automatically backed up by the cloud servers that the software uses, and this means you don’t need to worry about deleting a spreadsheet in error or your PC’s hard drive dying. It will all still be accessible with your log in.

5. Pretty Infallible

Now nothing is perfect and of course, mistakes can be made but they will come from the data you give any accounting software, rarely from the software itself. It doesn’t miscalculate things. Whereas one messed up formula or calculation can ruin a huge amount of data on a spreadsheet or in handwritten books, and you might spend hours trying to find the error.  Computers are much cleverer than us, and you need your accounts to be accurate.

6. Can integrate with other parts of your business

The amazing thing about accounting software is that it can integrate with other functions in your business. For example, if you take payments by Stripe, you can set it up so they go onto your system automatically. These automations save time and money. Zoho Books has 40 business apps you can use! And tools such as Zapier can be set up to integrate anything that isn’t listed. You can also link it to your banking feed, so payments and outgoings are tagged and reconciled.

7. Can chase debtors automatically or systematically

You can look for debtors according to how late the payment is and send out reminders or you can set them up automatically to send after set periods. This means your debt management can be kept up to date and we all know that if the money is received faster, then your cash flow benefits.

8. More Professional for Invoices

You can set up professional invoices to send to clients with your branding on them. This looks far more professional than something created in Word. You are able to add links to privacy policies or terms and conditions as well as payment terms, don’t forget to explain what the fees are for late payments.

9. Makes end of year accounting easier

Whether you have an accountant or do it yourself the end of year accounts and tax return are what most people dread. Having the data at your fingertips with reports and easy to view figures makes the whole process so much simpler.

You can also link receipts (software varies, some you can take photos and add straight to the app, or link emails etc.) so when it comes to the accountant asking for all those receipts you can have it ready to go. Or ideally up to date already.

10. By 2024 it won’t be a choice!

MTD ITSA– Making Tax Digital – Income Tax Self Assessment has been postponed a few times, but it is set to take effect from 2026 for over £50.000, whereby all self-assessment tax returns will have to be done electronically. Please see our blog on this subject for more info https://www.businessaccountingbasics.co.uk/making-tax-digital-itsa/

If you are VAT registered with a turnover of £85k+ then you should already be complying with this legislation. There is as yet no date set for corporation tax returns.

So, have we convinced you why you should use accounting software? Once you change, you won’t look back. There are many options to choose from, such as FreshBooks, Zoho Books, and QuickBooks, to name just three. Feel free to check out our other blogs to gather more information so you can make an informed choice according to your business needs.

To read more about why you should use accounting software, read our article on the best packages for your small business and QuickBooks vs. Xero comparison.

The post 10 Reasons Why It Makes Sense to Use Accounting Software appeared first on Business Accounting Basics.

Your name is all part of branding the business, the right name and logo can get more interest than boring names. It is important to let people know your type of business you run in the name. Most will use bookkeeping, accounting, accountants, accounting and tax, using any of these instantly lets the client know the service you offer.

Most of the big accountancy firms just have a name without anything after it. These include Price Waterhouse, Deloitte, Ernest & Young and KPMG. The names work as they are recognised by people and are large organisations.

Bookkeeping Business Names Ideas

The next thing to consider is a name to go with it, some use first names, surnames, places in the area that you want to work or a name that means something to you. It is worth considering that with the growth of cloud accounting and storage, your client could be anywhere, and you never meet them.

Once you have chosen a name it is worth checking that the name isn’t used by other businesses. Checks can be completed easily on Companies House for limited companies or Google search, also look in local directories.

It can prove very costly to decide to change the name at a later stage. It will include reprinting of any stationery, website, logo’s on invoices and letting clients know.

Choosing Bookkeeping Domain Name

Having the right bookkeeping business name is also important when choosing a domain name for your website. Using the words bookkeeping, accounting, accountants in the domain will help people and Google to know what your website is all about. A website can be a cheap way to gain clients if it is done correctly. There are lots of free ways to get a website, the most popular is WordPress. Although a paid domain and hosting will help with better rankings in search results.

You will also need to think about the overall feel for the business, do you want to make it sound fun or serious. It is also worth considering the type of clients that you want to work for. Some accounting firms specialise in certain sectors, like builders or retail. All these things will help to choose a name and branding.

Bookkeeping Name Examples

One way to get some ideas is to complete a Google search in your area. Write down all the names and see what you think of them, do they work? Do you know the type of business they are?

I completed a quick search on Bookkeepers in London and came up with a short list:

• Cain and Beer Certified Bookkepers
• SK Bookkeepers
• Braant Accounting
• London Bookkeeping Services
• Target Accounting

By making a list you can get an idea of what works and if any names look out of place.

I run my own bookkeeping business and when thinking of a name I wanted something that was personal to me. The business name is Littlefoot Bookkeeping Services, this is due to my daughter being born premature and having such small feet. The name has also become a good opener with new clients, as they are interested to know why it is called that. If you want to look at the branding the website is www.littlefootbookkeeping.co.uk.

Other bookkeeping business names I would have looked at are:

‘Surname’ Bookkeeping Services

‘County’ Bookkeeping Services

‘City’ Bookkeeping Services

The problem I have with these names is that the county I live in is a large area and I want to support local businesses. The city is not suitable as I live between a city and two towns and offer my services to the whole area and I didn’t want to use my surname.

Once you have chosen your bookkeeping business name, talk to friends, family and businesses to see if they like it, or ask them for other ideas. Brainstorming is a great way to create a complete brand.

We have written a complete section on starting a bookkeeping business. The guide includes calculating how much you can charge, the hours you can work, software and gaining clients.

Good luck with finding bookkeeping business names and choosing the right one.

The post Bookkeeping Business Names appeared first on Business Accounting Basics.

When running your own business, you get caught up in the day-to-day running of your business, trying to sell your products and services. The one thing that can get put on one side is the general paperwork and accounts.

You could save valuable hours by using online banking and spending a few minutes each day. Each day or week, login to your statements and post the transactions to your accounting software, excel spreadsheet or records. You will then be able to check that your accounts are up to date if you ensure that the bank balance is the same as your records.

As a bookkeeper, I often get asked at the last minute to complete accounts for a business and get passed an envelope of receipts and invoices. Completing the accounts on a regular basis could even save the expense of paying a bookkeeper or accountant, as well as being prepared for how much your self-assessment or Corporation tax you will need to pay.

Online Banking and Business Accounting software

Many of the new accounts online software will also import your daily transaction automatically. One example of this is XERO. Once your bank login details are saved to the software, the accounts package will download transactions for you. All you then need to do is allocate the amount to an invoice or enter an account code, e.g. Office stationery or car expenses.

Before signing up for any new software, try taking a demo to ensure that you can use the software. Also, ensure that your bank is compatible with the accounts package. If it can’t import the transactions automatically, you may be able to export them from your bank and import them manually to your software.

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