No matter if you’re trading as self-employed, a partnership or a limited company, every business in the UK has financial reporting obligations to meet. Making sure you have good bookkeeping helps your business compile accurate financial reports to meet these requirements. Good bookkeeping can also help increase your business’s overall profit. Here’s how.
Claim the Right Tax Deductions
If you’re a small business owner or self-employed freelancer then the chances are you hold on to all of your bills, invoices and receipts. Without making a note about the expenditure at the time it can cause issues later when you’re trying to remember what the invoice was for.
Good bookkeeping ensures you take a note of all your bills and invoices at the time they are issued. This way you record every payment ever made to suppliers and have the matching receipts or invoice with it. This makes sure you don’t overlook allowable expenses and never forget to claim a business expense that should have been tax deductible.
Improve Your Business’s Working Capital
Good bookkeeping can help small businesses and sole traders aware of any overdue payments from customers and clients. By keeping track of which clients are overdue on payments you can send them a friendly reminder or charge them any interest due. This ensures invoices get paid quicker thus increasing your available working capital.
Don’t Pay Too Much VAT
Any business that is VAT registered have an obligation to keep records of all their sales as purchases. They also have a separate record of the VAT the business charges customers and the VAT it pays on any purchases also known as a “VAT account”. In addition to this VAT-registered businesses also have to file VAT returns with HMRC on a quarterly basis.
By having good bookkeeping this allows you to help a business keep track of the VAT it charges on every sale and the VAT it pays on every invoice. This helps to ensure small businesses don’t pay too much VAT to HMRC when it files it VAT returns.
Spot Duplicate and Fraudulent Invoices
With recent statistics showing that over 47% of businesses have received fraudulent or suspicious invoices, good bookkeeping can help small businesses avoid invoice fraud.
A good bookkeeper will make sure that a small business always raises purchases orders for any order and that the invoice is only paid after it has been matched up. By doing this fraudulent invoices are much more likely to be spotted and caught when a business has good bookkeeping.
If you don’t receive any fraudulent or suspicious invoices then there is always the chance you could mistakenly pay an invoice twice. By assigning funds to a ‘funds out’ account against a specific company you can ensure an invoice is only ever paid once. Even if the invoice is sent to the wrong department or received several times you will have a record of allocating the funds to that invoice.
If you’re looking for a good bookkeeper for your business then get in touch with us below to discuss your requirements and get a consultation with one of our business advisors.