Bookkeeping for contractors: The risks of going DIY

As you'd imagine, a limited business is required to keep more data in comparison to Sole Traders, nevertheless, it is crucial to grasp the basics of bookkeeping, and then decide if it is something that could be handled internally or if you'd prefer to engage a professional service to handle it for you or your business.

Bookkeeping: What exactly is it?

Bookkeeping is the practice of keeping records of the company's finances. It is the process of keeping track of the revenue into the business as well as expenditures made from the business and any assets or obligations held by the business. The expense section also includes keeping track of business expenses that may be repaid. Even though this will explain the fundamental concepts of bookkeeping, there will likely be some education required in case you've never had to handle bookkeeping for a company prior to. But, with just a bit of time, it's feasible to handle your own bookkeeping, or for a small company. HMRC offers free training for small-scale business owners to remain compliant.

The risk that DIY can bring?

Although it is feasible to manage your business's records on your own, there are certain dangers to be aware of. We've listed the dangers that you may face if you go into the task of the bookkeeping process on your own.

1) Administrative errors

Though bookkeeping for small companies should be straightforward, the sheer volume of transactions may result in certain items going undetected. Make sure that income or expenditure are reported when they occur rather than waiting to recompense for them later on. Any errors that might have gone undetected in administration could appear suspicious later, and so it is necessary to verify everything before filing the account. Poor bookkeeping systems may provide reliable but insufficient data for accounting submissions for your company. Don't let this put you off; many software applications offer features designed specifically to minimise human error risk in bookkeeping processes.

2. Prioritisation

You prefer to spend your time creating revenue into your business and ensuring it runs smoothly. This means that administrative tasks are put down the priority list, while other things are likely to be a reason to not complete the bookkeeping task on a regular basis. This could lead to an accumulation of data that must be gathered and could result in the loss of supporting documents such as receipts or administrative mistakes. This is easily averted when you're organised and adhere to a strict program of re-creating your books - - or perhaps you find it enjoyable!

Again, security can be achieved by selecting an accountancy firm with expertise.

3.) Cost of time

The general idea is that DIY bookkeeping is less expensive since there is no need to exchange cash to pay for the services that need to be handled by a third party. But, this could be untrue based on the amount of time it takes to do the task in-house. There is the obvious cost of your time that could be better used to bring revenue to the company. To make matters worse, it is probable that you'll be slow in creating and organising the required spreadsheets compared to a professional accountant or bookkeeper. Furthermore, you might feel overwhelmed by the entire process that could provide enough reason for you to have your bookkeeping re-examined or outsourcing it to professionals.

4.) Education

You will have to know the procedure enough to create reliable spreadsheets. This can be challenging to manage simultaneously beginning or managing the contracting company. It could also mean the requirement to master the various types of software you're using to report your information; this could increase the risk of information to be lost or for mistakes to be committed.

In spite of some of the risks you may face doing bookkeeping for you or your small business it is crucial to keep track of the financial health of your business to be aware of how your finances are performing for you and your company. If you're keen to learn the basic principles of your company's financials and you are willing to take the an effort to keep your books updated regularly, and frequently, then DIY might be the right option for you. If you're the other way around and want to have to be as uninvolved in this procedure as you can It could be time to look for an accountant who is able to perform this job.

At Account Ease we provide accounts with all-inclusive packages. If you would like more information on this, call 028 133 4599 or email [email protected].