The importance of bookkeeping for small businesses
As you may have seen in our latest blog, for self employed and small businesses, keeping a thorough record of your financial transactions is essential for your next Tax Return. And while it might seem like a hassle, it's actually super important for the health and success of your business.
But why exactly is bookkeeping so important for small businesses?
In a nutshell bookkeeping is important for small businesses because it helps you maintain compliance with legal requirements, plan for the future, prepare for tax season, manage cash flow, and make informed decisions.
These may seem like amazing benefits but how does this work?
Legal compliance
As we just mentioned, small businesses and sole traders are legally required to maintain accurate financial records. It makes tax time a whole lot easier - no more frantically searching for receipts or trying to remember what you spent money on months ago.
This is ready for your Self-Assessment and Tax Return, which you must legally provide to HRMC. The business owner must be able to produce detailed financial statements and records that accurately reflect the financial health of the business. By keeping detailed records of income and expenses, you ensure that you are claiming all eligible deductions and credits, which can reduce tax liability.
Budgeting and planning
Efficient bookkeeping helps you stay organised and on top of your finances. You can see at a glance what's coming in and going out, which helps you make better decisions about where to spend and where to save. You have an accurate record to reference when you sit down to create a budget and plan for future growth. You can use financial statements, such as profit and loss statements and balance sheets, to evaluate the financial performance of the business and make informed decisions.
By analysing financial statements, you can also identify trends, opportunities, and potential issues and make decisions based on this information. You can also spot potential cash flow issues before they become major problems. For example, if you notice that your expenses are consistently higher than your income, you can take steps to cut costs or increase revenue before things get too dire.
By keeping track of income and expenses, a business owner can identify potential cash flow issues and take action to address them.
Looking for some extra cash management tips? Check out Acumenica's Top 10 Cash Management Tips.
Keep a record for outsourcing and collaboration
When you make the decision to outsource financial advice and projects to external parties (this does not include showing your finances to HMRC), you will have a story of your spending.
At Acumenica, bookkeeping is just one of the many services we offer for small businesses. We’ve embraced the 21st century with open arms. We're a cloud-first, technology-driven accountancy firm. This means we're not like regular accounting agencies, we’re a cool accounting agency. Moreover, with over 20 years of experience and expertise in financial management, we’ll offer your business the support it needs to truly thrive.
Besides, when you partner with us, you will always have access to your accountant—via phone, email or even in-person meetings.
That’s not all. Once we join forces, you will also have access to our award-winning cloud software, FreeAgent. With FreeAgent, managing your finances will become a whole lot easier and smoother. However, we’re also certified in Xero, Dext, and other solutions to fit your business requirements.
Contact us now to begin your journey to smoother financial management. Drop us an email at
