Bookkeeping Is More Important Than You Think, And Here’s Why…


I’ve been in the wonderful world of accounting for over 20 years now, having fallen into it quite by accident (but that’s a story for another day perhaps!).  And over the years these are just a few of the comments I’ve heard when people talk about bookkeeping…

  • ‘Anyone can do it’
  • ‘It shouldn’t cost that much’
  • ‘The software does it for you’
  • ‘It’s just pressing a few buttons, right’

So before we get stuck in, let me just put something out there…good bookkeeping is NOT any of these things.

Bookkeeping is the first part of the accounting process where all your invoices, receipts, expenses, wages etc are brought together into a system, usually a software system.  But it’s different to accounting, which is where the data is interpreted and presented.

There is some overlap between bookkeeping and accounting, but bookkeeping is like the foundations of a house which are built first.  You can’t build a house without them!

I’ll happily admit that you don’t need to have a qualification to do bookkeeping, but you do need to have some experience to do it right.  It’s not something you can learn in a day.  I learnt on the job and did bookkeeping for about 10 years before I got my qualification.  If you want to give it a go, you need to be the kind of person who loves precision and rules, so your books can be as accurate as possible.  But let’s face it…most people run their own business because they love what they do; not because they l0ve bookkeeping.

As for the cost, bookkeeping is supposed to cost that much, because if you buy cheap, you will pay twice!  I’ve had clients who’ve paid for someone to do their accounts, but they haven’t been done correctly, so they pay me to do the accounts again.  There is a risk to not doing it right, so look at it as an investment in your business, not a cost.  If you get your bookkeeping wrong and end up with Messy Accounts, it could cause you more time and money in the long run having it put right.  And getting it right will mean you won’t pay too much or too little tax!  Believe it or not, the bookkeeping part of your accounting fees may well be more expensive than your year-end accounts, especially if you are a business with a lot of bank transactions, as pricing is often based on transaction levels, which relates directly to the amount of work it takes to process the transactions.

Software…it’s absolutely everywhere these days and you can’t really avoid it, but you must remember that it’s the person using the software and entering the data that decides what goes where.  Yes, it’s automated to a point, and it might seem like ‘button pressing’, but you should always understand why the software is doing what it does, where it is allocating different things.  It’s a bit like making a cake when you don’t know what order to do everything…you put the eggs in the oven to bake, then you add the flour and the butter…or do you ?  Sorry, but I’m not eating your cake!!

So let’s try and break it down into the What, Why, When, Where and Who…

  1. What is bookkeeping?

It’s how you file all of your financial transactions.  Imagine a filing cabinet…any invoices for sales go in the top drawer…any expenses which are directly incurred as a result of your sales go into the middle drawer…all other expenses go into the bottom drawer.  Inside each drawer there are folders, so for example, insurance expenses will have a folder on its own, as will stationery, as will wages etc etc.

  1. Why is it important?

Because it’s the foundation of your accounts.  You need to see accurate, up to date information, otherwise you won’t know how much profit you are or, worse still, are not making.  You might pay too much tax or not enough tax if you’ve missed out receipts or not processed them properly.

  1. When should it be done?

As soon as you get a receipt or an invoice, it should be processed as soon as possible.  At the very least the bookkeeping should be done once a month.  If it’s not, you won’t see up to date information and that means you can’t make decisions on where you want to take your business.

  1. Where and how is everything recorded?

Usually on some kind of cloud-based software system…Xero is our preferred software, but there are several others on the market.  Even if you don’t yet have a software system in place, keeping a log of your receipts etc on a spreadsheet is a start.  Ditch the carrier bag though…everything can be uploaded via an app!

  1. Who does the bookkeeping?

Ask yourself if you want to be spending time processing your receipts at 10 o’clock at night after you’ve been at work all day?  You don’t have to…speak to a bookkeeper or an accountant to see how they can literally take all this stress away from you!  Yes, you will have to pay, but how valuable is your time and your peace of mind???

Getting your books right is like investing in a good underlay when you change your carpets…the better the quality, the better your carpet will feel…it’s the same with bookkeeping and accounts.

If you’d like to see if a review of your books might save you some money, just head on over to our contact form to get in touch with us.