How to keep your accounting recordsThere are a wide range of ways to manage a start up businesses finances, such as:
Manual bookkeeping – it is possible to satisfy HM Revenue & Customs by simply maintaining a cashbook of your income and expenditure periodically. This has become far less common over the past few years, as adoption of computerised systems has increased. The main issue with managing your finances in this way is that reporting is very time consuming, and there is a large risk of arithmetical errors.
Excel spreadsheets – many businesses that once used manual cashbooks have replicated these systems onto a spreadsheet. Although this allows you to put in formulae to add up columns and rows, it is far more difficult to report on the figures using Excel, particularly if you are not proficient with spreadsheet usage.
Desktop software – I’ve used the term “desktop” to denote any software package that is installed onto a PC or Mac, such as Sage or Quickbooks. Typically these packages cost between £100 and £500, and are available as an online download or at any software shop. They allow you to keep a full record of your banking activity, your sales ledger, and your purchase ledger; and often also allow you to raise invoices and track any stock that you may hold. These packages also give you a range of reporting functions, such as actual performance vs budget, profit and loss accounts, balance sheets and detailed reports of creditors / debtors.
Online software – recently, there has been a shift towards online accounting, with packages such as Xero and Quickbooks Online taking the early lead. They are offered as a monthly subscription, typically for £10 - £30, and provide you with access to your financial information on any computer, anywhere in the world. These packages allow you to use your time more effectively, as you do not need to be chained to a desk to process your bookkeeping, and often integrate with other packages such as CRM systems so that you can minimise your time spent bookkeeping. These packages can also allow you to use a “bank feed”, meaning that your banking transactions are automatically imported into the software. It seems apparent that most desktop packages are migrating to an online platform, and as such this is the route that I suggest for most new businesses.