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Bookkeeping for contractors: The risks of going DIY

Bookkeeping

Bookkeeping is a legal requirement for all companies and contracting companies are the same. In addition to being a legal obligation, it’s an effective method of keeping vital financial records together, prepared for financial reports to be formalized. If done correctly and properly, bookkeeping will help in reducing time and anxiety.

As you’d think, a company with a limited number of employees is required to keep more data in comparison to Sole Traders, nevertheless, it is crucial to grasp the basics of bookkeeping and determine if it is something that could be accomplished ‘in-house’ or if you’d prefer to employ a professional to handle it for your business or you iganony.

How do you define bookkeeping?

Bookkeeping is the practice of keeping track of the company’s finances. It is the process of keeping a log of all profits to the company and expenditures from the business and any assets or obligations held by the business. It also involves keeping records of business expenses that may be reimbursed.

While this is a good introduction to the fundamental concepts of bookkeeping, it will likely require some training 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 your own small company. HMRC actually offers training for free to small business owners to remain compliant.

The risk that DIY can bring?

While it is possible to keep the records of your business on your own, there are certain dangers to be aware of. We’ve listed some of the risks you might face if you dive in without a plan for running your own bookkeeping.

1) Administrative errors

Although bookkeeping in the main can be fairly simple for small companies, the sheer volume of transactions that occur within and out of a business could eventually create an environment in which certain items are not recorded. It is crucial to make sure that the income or expenditure is documented when it is earned, not at the point of payment.

Any errors in the administration that could be overlooked could appear suspicious, therefore it is imperative to make sure that everything is in order before the report is filed. A poor bookkeeping system can be reliable but may not provide enough information, leading to problems later when it comes time to submit the corporate accounts. That shouldn’t put you off as there are many software applications that include the capabilities of bookkeeping to remove certain risks of human mistakes.

2) Prioritisation

You would prefer to concentrate on earning money for your company and keeping it running smoothly. This can mean that administration tasks are pushed down the priorities, and other things are likely to be the reason for not completing the bookkeeping task on a regular basis. This could lead to an accumulation of information that needs to be recorded that could eventually cause the loss of documents such as receipts or administrative mistakes. This is easily averted by being organized and adhering to a strict plan of reviewing your ‘books’ and you might even be enjoying it!

Another 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 money for the service that will be handled by an outside party. However, this might be untrue based on the time it takes to do it on your own. It is obvious that there is an expense of your time that could be better used to bring revenue to the business.

To make matters worse, it is probable that you’ll be much slower in creating and organizing the required spreadsheets compared to a professional accountant or bookkeeper. In addition, you may feel overwhelmed by the entire process and could provide enough reason for having your bookkeeping checked or outsourcing it to professionals.

4) Education

You’ll have to know the procedure enough to produce reliable spreadsheets. It can be a challenge to handle simultaneously when you are starting or running a contracting company. It could also mean the requirement to master the various types of software you’re using to keep track of your data and increase the risk of information disappearing or errors being committed.

Despite the risks you may face managing your bookkeeping, your own company or a small one It is essential to keep track of your financial state to be aware of how your finances are performing for you and your company. If you’re looking to understand the basics of your company’s finances and are eager to make an effort to keep your books updated frequently, and frequently, then DIY might be the ideal option for you.

If you’re the other way around and would prefer to have to be as uninvolved in the whole process as is possible It could be the right time to look for an accountant to perform this job.

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