Bookkeeping is the cornerstone of accounting. Get it wrong and not only could you be in trouble with HMRC, but you could misjudge the financial position of your limited company.
In this article, we discuss the integral role that bookkeeping plays in a business and we lay out our top contractor bookkeeping tips.
Pay attention to the numbers
Bookkeeping and accounting are frequently used interchangeably. In fact, bookkeeping forms part of the accounting process. Bookkeeping is the recording, storing and retrieving of financial transactions for a company.
Information that it is typically recorded through the bookkeeping process includes:
- Billing for goods or services to clients
- Recording invoices from suppliers
- Payment to suppliers
- Recording receipts from clients
- Processing employees’ wages
- Recording depreciation entries
One of the reasons for keeping organised and accurate records is that by understanding the company’s financial position you are better placed to plan and manage its cashflow.
Bookkeeping can be time-consuming and at times it may be tempting to ‘put it off’ to another day. To help ease the pain of bookkeeping, these are our top tips:
Understand what records you need to keep
As a director of a limited company, HMRC requires you to keep Accounting Records, which amongst other things, includes details of money spent and received by the business. HMRC does not stipulate how these records must be kept. This is entirely up to you. You can choose to store them on an app, online or detail them using an Excel spreadsheet.
Whatever method you use, it is good practice from the outset to keep them organised and to get into a habit of reviewing them regularly.
Be aware of time frames for record keeping
If HMRC feels they have a basis for investigating your limited company, they can ask you to produce records that go back six years. If you choose to keep paper records, that’s a lot of paperwork to store. To prevent your home office getting over run with piles of paperwork, switch over to digital records. By storing information in the cloud, there is less risk of things getting lost. As long as you remember to back up your files!
Invest in tech to make life easier
There is an app for everything these days, and there is no shortage of apps that can help simplify your bookkeeping and accounts. One of the biggest benefits of using an app to record and track your financial records is that you get access to real-time data anywhere at any time, as long as you have internet access.
This is perfect for contractors who work have to travel a lot or who are frequently away from home.
Find an accountant that works for you
Let us demystify a myth about contracting. Contracting is not lonely, you’ll find that there are plenty of people who are willing to help and offer advice. But, when it comes to bookkeeping and accounting, we strongly recommend that you find an experienced contractor accountant, who you can work with.
If you’ve fallen out of love with your current accountant and are looking to move, you might find our article ‘Switching Contractor Accountants’ an interesting read.
If you’re a contractor who is struggling to keep on top of your bookkeeping or if just don’t enjoy the process and are looking to pass it on someone who does. Look no further! Give us a call on 01962 867550 or send us a message through our website, and together we can choose an accounting package that is best suited to you.