Partner Article

“Bookkeeping” – Is this the end?

The fundamentals of any business

There really is no two ways about it; bookkeeping can be a headache, especially for start-ups and small businesses. However, any successful businessperson will tell you that it truly is the bread and butter for any business.

Bookkeeping means keeping an up-to-date record of your finances, especially income and expenses. A business must comply with a number of regular legal and tax obligations, from filing accounts and VAT returns to corporation tax – all of which have to be filed accurately and on time with HMRC or Companies House.

Furthermore, it is vital for business owners to make sure they are always aware of their business’s financial position and performance; including trends in sales and profit, costs incurred - how much they can afford to take out, amounts owed, taxes due and whether there are financial problems ahead. Without this, it is impossible to have any insight on things like: what’s working and what isn’t, planning for the future or deciding on any potential investments.

Bookkeeping – Sticking with tradition

The traditional way of doing anything is by doing it manually, and the same holds true for bookkeeping - this includes paper records, spreadsheets, or using an accounting system to record transactions, all of which are a time-consuming distraction. But even if these records are immaculate and as current as possible, an accountant is needed to review everything and produce accounts and tax returns..

Accountants will process the records and the basic data received and use this information to complete VAT returns, company tax returns, and annual accounts - AKA your tax compliance burden as well as management reports that will allow you to see how the business is doing, run it efficiently and make decisions and are set out in a specific format that is often required by external parties. However, these can all take some time to process and produce.

There are two ways to go about the practice of bookkeeping: you can go solo or pay someone to do it. No matter which way you go about it, you will have to pay for extra management reports and tax returns, and you will find that there is a significant delay between organisation of bookkeeping and actually getting back information on your business from your accountant – including management of accounts or your tax liability calculated.

Last year, the Federation for Small Businesses released the following stats:

One in five UK small business owners said a lack of understanding about the tax system has led them to miss tax deadlines and half of those owners spend up to eight hours per month on tax admin. Admin for 11% tax takes an astonishing six days per month. Two thirds of owners estimate the cost of dealing with tax obligations at over £3,500 pa. One in three said a lack of cash flow planning led to not paying taxes on time.

The 21st Century – is digital bookkeeping the way forward?

If we were to take the stats above into consideration we could come to the conclusion that by doing things manually, the job doesn’t get done very well. There is however a simple and quick solution – go digital. All your business data is already there, in electronic form and can be easily accessed, shared and reused by using a modern online accounting service.

All sales invoices are recorded automatically into your accounts and your online business bank account statements can simply be uploaded directly into your secure records too. This way you don’t need to rewrite or re-key everything in order to remain up to date, and you even have the option of accessing/editing via your phone.

In addition, online systems automatically take the data provided and create management reports - so you always have 24/7 access to an instant real time picture of your business’s position and tax owed, without delays or paperwork. As an added bonus, your accountant will also have access to the data and can use it to complete the necessary tax returns and accounts, without chasing you for the info – now a deadline is never missed and you are always safe from paying penalties.

Accountancy and tax advice is also included when you use an online accounting service - you’ll have easy access to a named, single point of contact -a real accountant – for unlimited advice and support. Even the pricing is different to a traditional accountant - there are no surprise bills, commitments or exit fees - for a competitive, transparent, fixed monthly fee you get everything a small business needs to deal with accounts and tax.

Any 21st century start-up should know by now that modern “bookkeeping” is the only way forward. What an upcoming business can get from an online accountant is invaluable – whether it be quick 24-hour set-up, instant access to business figures, or unlimited tax planning advice from easily-contactable and responsive accountants. With an online service there’s more time to focus on the business itself and less time is spent dealing with spreadsheets and paperwork - it’s cheap too!

This was posted in Bdaily's Members' News section by John Hoskin .