There is a vast array of accounts software available for keeping your accounts which can be overwhelming if you don’t know what you need to do or the best way of doing it.
When you set up a business you need to record your trading income and your trading expenses. This is basic accounting and can be done by keeping a hand written record of your bank and cash transactions in a cash book. As your business grows you may find it a bit tedious to write out all your transactions so you might find it easier to record them in a spreadsheet. .
Whilst you can record your transactions as money in and money out you will find it a lot more useful to analysis your spending (and your income if you have more than one source). If you are hand writing your accounts you can analyse your spending in a large analysis book. Once you move to a spreadsheet you can create a column for each type of spend, grouping expenses appropriately so you don’t have too many columns.
A spreadsheet can be the perfect solution for many businesses – it is straightforward, you can often download your bank transactions into a CSV file which can be converted to a spreadsheet and all you need to do then is analyse the spend (or income) into relevant columns. Downloading your transactions will ensure you don’t duplicate or miss out any transactions. If you are inputting the transactions yourself you must check them against your bank statement (reconcile) to ensure none are missed.
Not all your transactions will go through the bank. Some purchases may have come out of your own pocket but you still need to record these if they are business costs.
Once you become VAT registered you will generally find it easier to use accounts software as it will help you to prepare your VAT return and ensure you don’t miss or duplicate transactions. Your choice will depend on the type of business you have and whether you want to have regular management reports. Your accountant may recommend software they are familiar with and not necessarily one that suits your business or you are able to use yourself.
Cost is important. Purchasing a small desktop accounts package can cost you less than £100 but will last you for several years. Popular cloud accounting software has a monthly subscription so you need to be sure that you can afford this – if you stop paying your accounts will no longer be available to you.
If you want to access your accounts anytime anywhere then cloud accounting is for you. If you feel safer keeping your accounts on your own computer then you need desktop software.
You don’t have to use software but when your business grows and your accounting becomes more complex you will definitely find it easier. If you need any advice or help setting up your accounting system give us a call. We offer one to business consultations, set up and training.