1. What is Bookkeeping?
Bookkeeping is completing your accounts using double-entry. There is always a debit and credit, meaning that your accounts ‘balance’.
Let’s use an example: let’s say you are an illustrator and send customers framed illustrations in the post. You will need to buy padded envelopes for the delivery. Let’s say you bought them from your business bank account. The double-entry would be to debit your ‘postage account’ (increase in expenses) and credit your bank account (decrease in assets).
2. Keep Spends Separate
It’s always recommended to keep your spending completely separate. Ensure to open a separate bank account for your business.
3. Accounting System
Choose a system to use: a spreadsheet or Xero, for example. Accounting systems will usually complete the double-entry within the system – but if using a spreadsheet, you will need to ensure both income and expenditure is recorded separately.
4. Chart of Accounts
These are codes that categorised where the item sits in your accounts. Ink for the printer = printing & stationery = expense.
5. Keep Records
Keep your paperwork for the requested time limit. Depending on whether you are a sole trader or limited company, the time required is different, so always check the government website. Either paper or electronically. If HMRC ever wants to view the document, they will expect you be able to produce it.
6. Regular bookkeeping
Complete bookkeeping regularly – monthly as a minimum.
7. Use the information
Use the information to your advantage. Now you’ve gone to the effort to keep your accounts up-to-date, use this important to make important business decisions.