Why Good Bookkeeping Isn’t Optional
…Even If You Think It Saves Money.
Let’s talk about bookkeeping. Because keeping accurate books is absolutely essential if you want to run your business successfully. Which is why we have a very clear rule when it comes to our clients:
“We either do your bookkeeping ourselves, or we work directly with your own qualified in-house bookkeeper.”
What we don’t do is work with external bookkeepers who aren’t part of our team.
There is a very good reason that we stick to this rule. We consistently see first-hand how much smoother and more accurate everything is when bookkeeping and accounting work hand in hand. When they’re handled by two different parties, things tend to get missed, muddled, or even misinterpreted. And that can mean unnecessary corrections, confusion over tax treatment and, ultimately, higher fees to put things right.
What is Bookkeeping Actually For?
At the heart of your accounts, there are two key reports:
- Your profit and loss account: This shows how well your business has performed over a given period.
- Your balance sheet: This is more like a snapshot of your financial position at a specific point in time.
To get either of those reports right, it is essential to make sure your bank and cash balances are correct. If either of these are wrong, everything else will be wrong too.
This is why bookkeeping needs to be handled properly and why we insist on keeping it in-house. It’s not about control. It’s about ensuring everything feeds directly into your accounts correctly, and ensuring that nothing gets lost in translation.
Tax, Drawings, and Why Getting It Right Matters
This is important for sole traders. We often see people accidentally recording money they’ve taken out of the business as ‘salary’. But if you’re a sole trader, you don’t have a salary – you have drawings.
There’s a crucial difference between the two, because sole traders are taxed on profit, not on how much they withdraw. If drawings are treated as wages, your profit will look lower than it really is. This can be problematic because it throws off your tax calculations and could lead to a nasty surprise later on.
When our bookkeepers and accountants work together (which they do every day), these things get caught before they become a problem. As a team, we all work from the same understanding of how your accounts need to flow.
Why it’s Important that Bookkeepers and Accountants Work Together
This is where our joined-up way of working makes such a difference. Our bookkeepers and accountants don’t just work in the same firm, they literally work side by side. Sitting next to each other in the same office means they are constantly in touch with each other.
Our bookkeepers aren’t just ticking boxes and processing paperwork. They’re thinking ahead to the accounts, to your tax return, and to the decisions you’ll need to make later on. They know what’s allowable, how tax rules are changing and how we apply those rules in practice. And if they’re not sure about anything, an accountant is on hand to advise them.
That knowledge is implemented into your bookkeeping at an early stage. So, by the time your accounts or tax return is prepared, the groundwork has already been done correctly. This saves lots of time in the long run as there is no back and forth. There is no confusion and no expensive unpicking of mistakes made by someone who didn’t understand the bigger picture.
Knowing What You Can (and Can’t) Claim
This joined-up approach is also essential when it comes to expenses.
- That sandwich you grabbed while working from home?
Not allowable. - Lunch while you’re working away?
That might be. - Branded workwear for your team?
Likely fine. - A couple of nice tops for yourself?
Almost certainly not.
Because our bookkeepers and accountants work together, these decisions are made correctly in the first place. And they’re consistent across your records. That’s the difference between working with a team who understands both bookkeeping and tax versus someone who only handles data entry without seeing the full picture.
VAT – Much More Than Just 20%
VAT is another area where this matters enormously. People often assume that VAT is straightforward – just 20% and you’re done. But in reality, VAT is one of the most complex taxes we deal with.
Did you know that there are five different VAT rates? Not to mention rules about the place of supply, exemptions, and special cases when trading internationally.
When bookkeeping and accounting are handled under one roof, there’s constant communication about these matters. When they’re split between two firms, things can easily go wrong. And VAT is not a tax you want to get wrong.
The ‘Saving Money’ Myth
Some business owners think they can save money by doing their own bookkeeping. Or by handing it to a cheap bookkeeper they found online.
But what happens if you’re not trained, or if your external bookkeeper isn’t working hand-in-hand with your accountant? Most likely, you will end up spending more money to fix mistakes than what you saved in the first place.
And, if you’re spending time on your books when you could be working on your business, you’re effectively paying twice. If you really do love numbers that much – well, I’m always happy to hear from people who fancy a career in bookkeeping!
It All Starts with Joined-Up Bookkeeping
Your accounts, your tax return and your ability to make informed decisions all depend on the quality of your bookkeeping. That’s why we insist on doing it ourselves or working with your own qualified in-house team if you have one. It’s the only way we can guarantee the accuracy and reliability of your numbers.
Working with the Composure team, you can be confident that everything is being handled properly from start to finish. So, if you’re ready to put your books in safe hands, get in touch. We’re always happy to have a chat about how we can help.
