Bookkeeping is probably the most undervalued work in your finance function as the only way to keep your financial information up to date and reliable is through bookkeeping.

Bookkeeping has two objectives:

1. To accurately document all financial transactions
2. To determine and analyse the financial outcomes of business activities

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Many businesses fail to implement bookkeeping into their processes, resulting in a lack of insight into their business and massive frustration as you are pretty much blindly driving your business down a dark road.

If you have unreliable or outdated information, how would you know the financial position of your company is? You need this information to know what is happening within your business!

A common cause why construction businesses fail is due to poor cashflow management and a symptom of poor cashflow is poor bookkeeping! If you want to build the foundations of your business correctly, the first step in any accounting process and probably the most important is bookkeeping.

The benefits of doing bookkeeping:

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1. To Pay Less Tax

If you are using a bookkeeper (most accountants offer this service), you will be having someone who will be maximising your deductions and helping you pay less tax while keeping you on the right side of the taxman! Plus you are required to keep good records otherwise you could receive a penalty of up to £3,000…

If you are planning to start, or improve your current systems - using software like Xero or Quickbooks can be great for keeping you on the right path.

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2. Reporting

If you undertake any reporting and have outdated information then your reports are pretty much useless… your reporting will be only as good as your bookkeeping.

Having up to date and reliable information makes your reports accurate and dependable to make important business decisions to maintain and scale your business.

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3. Building Your Financial Blueprint

Building a budget is like a financial roadmap for your business, allowing you to plan for where you want to go and the costs you expect to happen along the way. When your bookkeeping is up to date and organised it will make it a hundred times easier for you to review your finances and costs to turn them into a budget.

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4. Easier for a Tax Investigation

If you are chosen for a tax investigation it can be a time-sensitive and stressful process with a full review of your tax returns and accounts to ensure you are paying the correct tax to HMRC.

If HMRC investigates your business, your books need to be in order otherwise it will prolong the process and make your business more liable to fees and penalties due to poor bookkeeping

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5. Cashflow

Bookkeeping can actually help with your cashflow! With up to date information, you will be able to see what customers owe you money and if there are any coming up to their due date. One of the essentials for business owners is focusing on the cashflow management of your business.

If you want to systemise your finance function, you need to have updated financial information which can only be achieved through bookkeeping.

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6. Peace of Mind

Unorganised books, HMRC giving you problems and tax deadlines approaching can contribute to stress and uncertainty within your business. As a business owner, the last thing you want on your mind is bookkeeping issues weighing you down.

When your books are complete and tidy (especially if you use a bookkeeper), you can sleep at night knowing what is happening in your business and what you need to do next. You know your information is correct and organised if HMRC ever needs to review your information.