Most people are familiar with the term ‘bookkeeping’ and understand that it relates to the accounts of either a company, a private members club or an organisation such as a charity. In a technical sense bookkeeping actually relates to the input of transactions usually by the method of double-entry, hence the term ‘keeping the books’. However, accounting is about much more than just recording transactions, important though this process is.
In addition to documenting financial activities a company also needs to analyse and interpret financial information and this task is generally known as ‘financial reporting’. The combined processes of bookkeeping and financial reporting form the basis of what accounts people refer to as ‘business accounting’. At Almond Accounts we carry out all the necessary bookkeeping elements for our clients and then use this information to produce financial reports such as the ‘profit and loss account’ and ‘balance sheet’.
There are a variety of reasons as to why it is important to keep good business accounting records. One of these is in order to comply with government legislation. A sole trader will have to complete a self assessment tax form each year and pay tax and national insurance just as an employee does. A limited company must pay PAYE/NI if it employs people, VAT if it is VAT registered and corporation tax if it makes a profit. The calculation and correct payment of these taxes and national insurance can only be done if the accounting information is available and also reliable. HMRC will fine companies that do not comply with statutory regulations.
Another reason for maintaining good business accounting records concerns the day to day operations of a business. The income stream of a company less its expenditure determines its profitability. If income is lower, on average, than expenditure a business can only operate for a limited period before it fails. However, good business accounting records/reports will enable an enterprise to spot problems early on and take remedial action. This might involve putting up prices and selling more product. It may involve finding cheaper suppliers and cutting costs. Alternatively, the company could be operating inefficiently and realise that it needs to increase productivity.
As a result of accurate record keeping and reliable financial reporting a business will be able to make informed decisions about pricing, sales, purchase costs, operating costs, productivity, finance, investment and growth. Making the right choices is key to both current success and long term survival. However, the processes required to carry out business accounting are varied and can become complex. Even a small company will undertake many business operations involving numerous financial transactions. In order to facilitate this the use of computerised accounting systems has proved highly beneficial. Computerised accounts achieve greater accuracy, save time and have the capacity to produce various financial reports at the touch of a button.
At Almond Accounts we use an accounting software package called ‘New Sage 50 Accounts’. Sage is the most popular and widely recognised accounting system on the market. It is comprised of a set of highly sophisticated accounting modules covering each accounting process. It has tremendous functionality plus powerful analytical tools and is therefore ideal for processing our client’s business accounts. Whether you are a sole trader just starting out or a more established business with a solid track record we can provide the accounting solutions that will enable your enterprise to flourish.