Bookkeeping for Small Businesses

When you work for yourself – whether as a sole trader, freelancer, contractor or small business owner – it’s essential to keep on top of your business finances.

A critical aspect of this is bookkeeping. Bookkeeping for small businesses is the recording of your incomings and outgoings. But if you’re new to self-employment, it’s another thing to get your head around – and it can be daunting if numbers aren’t your forte.

We’ve covered the basics in this article so you can understand and get started with bookkeeping for your small business.

What is bookkeeping?

Bookkeeping is recording financial transactions – income and outgoings – into organised accounts. It’s one of the key practices in the overall process of accounting.

What's the difference between bookkeeping and accounting?

Accounting is a business function built on bookkeeping and other financial processes, like cash flow forecasting, along with your tax obligations.

Together, bookkeeping and accountancy give you the complete picture of your business finances, while also ensuring that you meet all of your tax responsibilities.

Why is bookkeeping important for small businesses?

The importance of bookkeeping for small businesses is evident. It helps you see whether you’re spending more than you’re earning, and keeps you on top of invoicing clients, along with expenses such as paying any suppliers.

Having accurate financial records is essential when it comes to your tax returns, too – whether your self-assessment or Corporation Tax.

DIY bookkeeping compared to hiring a professional

Some small business owners choose to manage their own bookkeeping. Software options are available to make the task easier for you (we’ve suggested some below).

But if you’re not confident about bookkeeping, you can engage the services of a trusted expert.

The cost of small business bookkeeping

If you’d rather outsource bookkeeping to a professional, accountancy firms – like Caroola – can help.

We offer full-service accountancy services – which includes bookkeeping – for sole traders and limited companies, with monthly fees starting from just £40 per month.

How to do basic bookkeeping for a small business

Bookkeeping’s reasonably straightforward, and boils down to a few simple responsibilities:

Recording your transactions

The first and most important step is to record every single transaction you make. You can do this with bookkeeping software, on a spreadsheet, or writing in a cashbook.

Reconciling your transactions

Reconciliation is matching each transaction from your cashbook (or software) to your bank statements, to ensure that everything matches up.

Accounts payable and accounts receivable

Accounts payable is what you owe; accounts receivable is what you’re owed.

Accounts receivable is also the term for the steps in the collection process. So, accounts receivable covers the issue of an invoice, chasing payment and reconciling the invoice and the payment, too.

What's the best software and apps for small business bookkeeping?

Plenty of options are available if you want to manage the bookkeeping process yourself. FreeAgent is a leading software provider (who partner with Caroola) and are definitely worth checking out.

Can you use Excel for bookkeeping? (free template)

You can also find free Excel templates online to help you get started with your small business bookkeeping, like this one from

Where to learn more about small business bookkeeping

You could take a short course if you’d like to learn more about bookkeeping. There are plenty available online – we’ve recommended some below – and others that you can attend in person.

Best free bookkeeping courses for small businesses

Several courses are officially accredited, while others will give you a basic understanding; you can find free or paid-for courses, depending on your level of interest.

  1. OpenLearn offers a free Introduction to bookkeeping and accounting
  2. Event Trix has a paid course on Accounting & Bookkeeping

So, bookkeeping is essential for any small business, no matter how you operate. And with the free and paid-for options available, you’ll be able to get started in the way that best works for you.

To find out how Caroola can help with your bookkeeping and day-to-day accounting requirements, please get in touch.

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