How to Start Bookkeeping for my Small Business

In the UK, businesses must keep accurate and comprehensive records of their financial transactions. These records are not just a legal requirement; they also help you track your business's performance, maintain the accuracy of your financial reporting, and comply with tax obligations. Finally, they can offer vital support if you face an audit and help to smooth out the process.

While there are benefits to record keeping, it can also be challenging for small businesses that do not have resources to spare. If you decide to do your own bookkeeping, you must develop and implement suitable processes yourself. On the other hand, if you work with a professional bookkeeper or another third party, you must trust them to oversee your company's financial situation properly.

There are several bookkeeping and accounting methods available, and employees who are inexperienced in bookkeeping tasks often struggle to find the best approach. If you want to work with professional bookkeepers who prioritise communication and take the time to understand your business' finances in detail, choose Monetta. Our team invests the time to help small business owners realise their ambitions, maintain legal compliance, and benefit from tax allowances and savings. With our reliable bookkeeping services, you can be certain to start your business on the right foot.

Here, we outline some of the key considerations about bookkeeping, business finances and legal compliance, to help you decide how best to meet your small business' bookkeeping needs.

What are the UK's small business bookkeeping requirements?

Businesses in the UK are legally obliged to store financial records. These apply equally to small businesses as to large ones - although, with fewer resources at its disposal, a small business with an in-house bookkeeper will face more difficulty in fulfilling its obligations.

The law states that businesses must keep records of every single transaction. This includes:

• All sales and income
• All purchases and expenses
• VAT records (if the business is registered for VAT)
• Payroll records (if the business has employees)
• Records of personal income (if you are a sole trader) 

These details should be kept in a way that is clear, readable and accessible for HM Revenue & Customs (HMRC). You should also keep purchase and sales invoices, receipts, bank statements, business credit card statements and any other evidence of your business transactions. VAT-registered businesses must keep VAT sales and purchase invoices, a VAT account, and any import or export records. These are essential for completing VAT returns.

You must keep business records (including any VAT records) for at least six years from the end of the last company financial year they relate to. You may need to keep them for longer in certain situations.

You must also use digital bookkeeping software if you are VAT-registered, in order to submit your tax returns online. This software is indispensable for small businesses because it can automate aspects of the bookkeeping process. Digital bookkeeping is a good place for any small business owner to start.

Using digital accounting software

Accounting and bookkeeping software offers vital efficiency improvements to small business bookkeeping once you have learned to use it. Good software packages let you back up data to a cloud storage system and access it from anywhere, which gives you greater real-time insights into your business' financial health. They can also integrate with online payment gateways to record transactions automatically, and use optical character recognition technology to scan invoices and receipts.

As well as meeting basic bookkeeping requirements, small businesses must prepare financial reports, annual business accounts and tax returns. Limited companies have to file accounts with Companies House and HMRC along with their tax returns, while a sole trader or partnership must submit a self-assessment tax return annually. Many of these financial statements and documents must now be filed online under the government's Making Tax Digital initiative, and this requirement will expand in the future. By using accounting software for all of your financial records and reports, you can future-proof your small business against changes to your reporting requirements and make sure your accounting process works effectively.

However, while most accounting software allows you to carry out bookkeeping tasks and file financial documents more easily, you must thoroughly understand the relevant legal requirements to use it effectively. This is difficult when you start your bookkeeping journey, especially alongside other day-to-day tasks, but there is no room for error. For this reason, employing a third-party professional bookkeeper with experience using digital bookkeeping software is the best way to meet your legal obligations.

Working with a professional bookkeeper

Working with a professional rather than carrying out your own bookkeeping is the most reliable option for small businesses. An experienced bookkeeper from Monetta can quickly identify the best bookkeeping method to meet your organisation's needs and take on this responsibility, while you focus on the business' health in its early days. It is more reliable and cost-effective to hire us for this role than an in-house bookkeeper.

At Monetta, we have a wealth of experience in this area. As a firm of professional bookkeepers, we can scale up the bookkeeping services we provide as your business grows. Our objective approach can help you to set realistic goals, recognise warning signs and benefit from tax savings or allowances. We take the time to understand your business goals and reporting needs - for example, we can monitor healthy cash flow and advise you of any issues that may arise - so you are compliant and prepared for any decisions you need to make.

Thanks to remote working technologies and cloud-based accounting, we can deliver our small business bookkeeping services from your premises, or from our offices. Alternatively, we can advise you on implementing a suitable accounting process internally to keep your business' financial activity aligned with legal requirements.

To learn more about how our professional accountant can help you meet your legal obligations, avoid bookkeeping errors and unlock insights from your financial data, contact Monetta today. You can call your local Monetta office, or use our online enquiry form to request a call back. The examples above are only suggestions of how we might be able to help, but by discussing the specifics of your situation we can explain exactly what we can do for you.