Bookkeeping Basic You Must Know As a Small Business Owner

• Reading Time: 7 Minutes
• Published: July 28, 2021
• Last Updated: February 13, 2025

An accurate bookkeeping process can assist in running a business successfully. And this does not apply to just small businesses but all businesses. Small business bookkeeping can sound scary for a lot of new business owners. However, provided with the proper understanding and basics of bookkeeping, every individual can efficiently conduct and monitor their business bookkeeping process.

Here is a list of bookkeeping basics for small businesses that will help you in your bookkeeping process –

1. Record Keeping

Accurate record-keeping of all business transactions is the key the having the proper foundation for your accounting process. Whether an incoming transaction or an outgoing transaction, ensure that you record all transactions accurately without any error. Making use of accounting software will make this process easier for you. Invest in one if your budget allows you to other you can do it manually. Having accounting software is suggested to reduce errors and eases up the process as many accounting software have automatic bank feed options.
Having an accurate record helps you have a clear idea of your cash flow and a more straightforward tax calculation. It is always advised to record the transaction as and when it occurs, as this helps you avoid any last-minute mistake during your tax calculation. You must keep these records for six-year if you have limited company. Otherwise, we suggest doing so as it helps to act as evidence in case of an audit.

2. Reconciliation

Reconciliation is an important task that you have to conduct in the accounting process as it helps you avoid errors. It enables you to detect any discrepancies in your accounts. Few accounts you must reconcile without fail are bank accounts, accounts receivable, accounts payable reconciliation. We advise conducting a reconciliation process every month.

3. Cash flow analysis

Regular cash flow analysis will help you understand your cash position. If your cash outflow is more than cash inflow, you will soon face cash deficiency, and further, this might disrupt your business operations. A lot of accounting software provides a dashboard in which you can understand your cash flow efficiently. Having an understanding of your cash flow will help you to plan your funds in a better manner. It also allows you to budget and forecasts your cash flow.

4. Monitor your Receivable

Your accounts receivable are very important for your business cash inflow. Accounts receivable arises when customers buy goods or services on credit. If you fail to track your accounts receivable on a timely basis, your receivable can turn into bad debt. This is not good for your business as it disrupts your cash inflow.

5. Employee Payroll
To run a business, you might need to hire employees, and the moment you hire an employee, you need to consider the payroll obligations.  You must register for PAYE(Pay As You Earn) before you start paying your staff, after which you have to deduct the right amount of NI and tax from staff’s wages. In case you are self-employed, you can pay your self-assessment bill through PAYE as well. To learn more about PAYE,

Also Read “All You Need To Know About PAYE.”

6. Analyse your financials

Your business’s financial statements are like health reports of your business. You must analyse these as frequently as possible and try to understand where your business stands. As a layman or a business owner, it might be possible for you to interpret and analyse these data; however, you can take the help of your outsourced accounting and bookkeeping services provider. Accounting software also interprets these data to some extent, but it is suggested to take professional help instead of relying on software.

7. Business Taxes

We know the word tax itself might make many business owners shy away from the accounting process itself. However, taxes are a critical part of running a business. Different taxes are applicable for different business structures. Make yourself aware of these is taxes or take professional help but ensure that you are always on top of your tax liabilities to avoid unwanted penalties. If you are a sole proprietor, you need to register with HMRC for Self Assessment. For limited companies, you must pay Corporation tax.

Learn about: Business Expenses You Can Claim as a UK based Limited Company

VAT is another important tax that you must calculate and charge on behalf of HMRC on the goods and services you sell. Read our VAT guide for beginners if you want to learn about VAT in detail.

If you’re a new small business owner, it is helpful to take the help of a professional bookkeeping services provider, as this will ensure that you do not lack behind in any of the bookkeeping tasks. A big blunder that most small business owners make when they start is to take on every business activity on their own. While many tasks can be conducted by yourself, it will hinder your core business activity. We hope this list helps you in setting up an accurate bookkeeping process for your small business. If you want assistance with setting up a bookkeeping process for your business, you can contact our experts.

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