Checked and Balanced Accounting

their failure to maintain proper financial records. Whether you do it yourself or hire someone else to do it, bookkeeping is essential. Taxes - You will have to provide information to HMRC regularly about your business’s profits or losses so that they can assess the amount of tax you owe. Failure to keep up to date with your tax affairs can lead to serious repercussions, as HMRC can impose large fines and penalties which could lead to the demise of your business. Cash Flow - Keeping track of cash flow is critically important for any business and it’s only possible if you have accurate financial records. Many seemingly profitable and growing businesses have failed because they have suddenly been hit by an unexpected cash-flow crisis. Expenses - Sole traders can claim specific expenses which have been wholly and exclusively incurred as part of their business. Expenses should always be paid for directly from the business bank account and should ideally be submitted on a monthly or quarterly basis. This ensures that the person doing the bookkeeping has an understanding of outgoings and can monitor them for tax and accounting purposes. Profitability and Growth - Accurate bookkeeping allows you to see whether or not your business is actually making a profit. It is surprising how often business owners fail to keep track of this but it is obviously extremely important. Bookkeeping also allows a business owner to have a greater understanding of how much progress has been made. You can look back and see patterns and draw comparisons with previous business years. This can provide a greater understanding of the areas within the business which make a profit and where costs might be trimmed. This kind of financial analysis can help you to avoid problems in the future.