Bookkeeping is a lot like brushing your teeth: Doing it regularly and keeping up with good habits saves you many problems in the long run. However, unlike brushing your teeth, the reasons why good bookkeeping is important may seem less obvious.

Firstly, why is good bookkeeping important?
It is much easier to keep up with good bookkeeping, and perhaps even get excited about it, if you know the reasons why it is important and how it can benefit you and your business. There really are so many positives but a few of the key ones are discussed below.

Keeping your bookkeeping up to date, preferably monthly, means you have access to real time information about how your business is performing. For example, you see your dream home and you need a reference from your accountant for the mortgage. If your bookkeeping is up to date this process will be much easier, and quicker because all the up to date data is on hand.

Want to know how your business performed this month compared to last month? Good bookkeeping can also help with this. By doing it monthly, and keeping on top of it, you will always have access to information about the aspects of your business that are performing well, and those that may need a little more work (which Hive would be more than happy to help you with by the way).

On top of this, it will be easier for your accountant to help you with tax savings because all of your financial information will be accurate, up to date, and in one place. How does this work? By looking at your tax liability for the year, with the real time information that you have provided by doing great bookkeeping, your accountant will be able to tell you if you could make tax savings by buying that new piece of equipment you have been thinking about, or if you should put more money into your pension.

Finally, the last reason I am going to discuss is the upcoming move to making tax digital, coming in April 2024. Moving onto digital bookkeeping now, with a package like Xero, is a great way to ensure you are ready for these changes.

So, we know the why’s, now for the how.
Sadly, good bookkeeping does take a little bit of work. But the good news? Much like our earlier comparison of brushing teeth, if you do a little bit of effort regularly it saves a whole heap much harder (and much more painful – hello root canal!) work in the long run.

A quick overview of what makes good bookkeeping is:

• Using a cloud based software – we recommend Xero
• Setting up a suitable chart of accounts – the places where the transactions will be reconciled
• Keeping the bank feed up to date and ensuring it is reconciled regularly – with transactions put in the correct place. For example, purchasing a new loupes is an asset, not repairs and maintenance.
• Keeping reconciliation consistent – recording similar transactions to the same place
• The bookkeeping should contain balances of any loans, as well as repayments

This is obviously a very quick overview and insight as to why bookkeeping is so important and the foundation of finances in your business. If you would like to learn more or think your business could benefit from some good bookkeeping practices, please get in touch. We would be more than happy to help.