What is Bookkeeping?

1: What is bookkeeping?

Bookkeeping is considered a boring, but necessary part of business. It is the process of recording, classifying and organizing financial transactions that occur within a business. It is an essential part of managing a business’s or charity’s finances.

There are 2 main types of bookkeeping:

1. Single-entry bookkeeping – records only the cash transactions of a business.

2. Double-entry bookkeeping aka double-entry accounting – records every transaction in the form of a “debit” and a “credit”. This is to maintain a balance of “debits” and “credits” – commonly phrased as “balancing the books”. Double-entry bookkeeping or double-entry accounting is the most commonly used form of bookkeeping.

The data entry for bookkeeping can arise in different forms, such as:

• Manual data entry by handwriting onto Sales Day Books, cashbooks or other books of prime entry.

• Electronically by entering data onto spreadsheets or databases, such Excel or Google sheets.
• Electronically using accounting software, such as Xero, Intuit Quickbooks or Sage products.
• Combination of any 2 or more of the above. For example, a manual Sales Day Book and Petty cash book, but a spreadsheet cashbook.

2: What is the difference between accounting and bookkeeping?

Bookkeeping is a vital subset of the accounting function. Accounting also follows on from the bookkeeping process by interpreting, summarising and analysing the recorded financial data to provide insights of a business. This could be in the form of management accounts, annual statutory accounts as well as for taxes such as corporation tax, VAT or Self-Assessment tax returns.

Without reliable bookkeeping as a stable foundation the rest of the accounting process can suffer and may not provide the value added that your growing business needs.

3: The importance of bookkeeping for small and medium-sized businesses and charities

All businesses and charities need bookkeeping in some form. Small or medium-sized businesses and charities make critical choices regularly so it is vital that dependable, reliable information comes from bookkeeping process.

This information is fundamental and can be pervasive across your business or charity. We cover many of these areas in more detail here.

If you are a small or medium-sized business looking to develop or review your bookkeeping function, contact us today!

4: The Bookkeeping Process

The bookkeeping process is a methodical, step-by-step procedure that involves the following steps:

1. Obtaining and collating all financial records:
This involves gathering:
– all paper and digital purchase invoices
– all the little stationery, postage or taxi receipts that may have been paid by cash
– complete details of bank and/or credit card payments.
– expense claims, including any mileage allowance made by staff and directors as part of carrying out work for the business.
This process should be done in a timely manner whilst also looking to avoid omissions.

Receiving purchase invoices late, for example, could lead to late payments to important suppliers, slower deliveries and Input VAT not being claimed that could lead to overpayments of VAT.

2. Recording all financial transactions:
This involves data recording of all the financial records mentioned above. This can be done manually in books or paper or electronically in spreadsheets, databases or accounting software.

3. Categorizing or classifying transactions:
The recorded transactions need to be categorized or classified according to their type. For example, sales transactions should be categorized as Sales revenue, while expenses such as wages, rent, insurance should be categorized accordingly.

4. Reconciling accounts:
This involves checking and reconciling bank statements, credit card statements, and other financial statements to ensure that the totals of the recorded transactions through the bookkeeping process matches the balances in the bank statements or credit card statements at the end of the period. This is a good check on whether all transactions have been recorded during the period.

5. Closing the books at the end of each period, and preparing for the next period:
Once all transactions have been recorded and classified, they can be summarized, analysed or used to in financial statements, such as income statements (profit and loss accounts) and statements of financial positions (balance sheets).

The bookkeeping process ends with closing the books at the end of the accounting period, which can be monthly, quarterly, or annually. This involves noting the adjustments, making the additional entries and tax journals provided by the accountant when finalizing the financial statements or management accounts and rolling forward the various balances for the next accounting period.

For help improving the bookkeeping process in your business, contact us today!

5: How should I carry out bookkeeping for my business or charity

Good bookkeeping should be integrated into everyday business activity and carried out regularly on an ongoing basis. Bookkeeping should be tailored to meet your needs, complexity and size whilst also working within a reasonable budget. Check out our guide for the type of bookkeeping needs for businesses or charities of differing sizes.

The business environment is constantly changing and your business may have bumper periods of success and periods of slower business. Your business may be seasonal in nature or works with a variety of products or services or projects with differing timelines. These are amongst the many factors that affects the number of transactions that your business will have and the amount or type of data recording needed.

It is important that your bookkeeping function can adjust accordingly therefore:

• having a trusted, qualified and experienced accountant that is always available that you can count on to help you is highly valuable and recommended. They should have a real understanding of your business requirements:
o to best plan and set up the bookkeeping for your business
o that would involve bookkeepers, staff, accounting software or a blend of different software.
o Being able to freely reach out and discuss changes with your accountant will allow them to be able to        update or adjust your bookkeeping to continue to best fit to your business.
o By choosing us as your accountants, we can be a constant supporting presence for your business as it        grows and changes.
• A written document or instructions that is kept up to date is highly advised in case there are absences    or changes in staff or bookkeepers.
• Training for staff should be considered and support should always be available if needed.
• Accounting records should be stored securely, either digitally or in paper-form that can be easily            referenced. This can be done alphabetically, by transaction number or date or a combination of factors.
• Bookkeeping should work alongside your other business activities and should encourage better communication within your business.

Contact us today and let’s help you with your business needs!

6: Should I use a bookkeeper?

Bookkeeping should really be carried out in all businesses and charities, but this may not require a dedicated bookkeeper.

For example, a small business or charity with few transactions, customer and suppliers may be able to divide the bookkeeping tasks amongst staff or if the business is a sole trader, this can be done themselves. For such businesses, an accountant can advise and provide simple processes that fits within your day-to-day work.

Businesses with more transactions, customers, suppliers and staff would require more time for record-keeping. Such businesses may need other work related to bookkeeping, such as credit control, carrying out payroll runs, reviewing and managing purchase orders and payment authorisations. Doing this yourself can inhibit your day-to-day work by preventing your from providing the best product or service to your customers or clients, which can then impede your business’s growth. In these instances, it is worth considering hiring a bookkeeper.

The added complexities also may require more training that an experienced, qualified and dedicated bookkeeper can provide.

With 15 years of experience working with small and medium-sized businesses and charities, let our qualified, experienced and trusted accountants with a dedicated bookkeeping service help develop a tailored, suitable bookkeeping set up for your business or charity. Contact us today!

Our FAQ’s section provides information to consider when choosing a bookkeeper. Also check out our guide on whether to employ an in-house bookkeeper, hire an external bookkeeper or use your accountants to carry out the bookkeeping with their own dedicated bookkeepers.

7: Popular accounting software options for bookkeeping

Accounting software has become more widely used with much more choices being offered by cloud based software. Since Making Tax Digital (MTD) for VAT was introduced, which required VAT return filing directly through software, many businesses have opted for accounting software packages for their bookkeeping and VAT filing needs.

The introduction of Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) to become effective from April 2026 reinforces the HMRC’s plans for digital return filing through software and represents another potential wave of individuals, landlords and small businesses to select accounting packages.

It automates repetitive tasks, streamlines data entry and financial processes, and provides a single package that works with multiple parts of the accounting function. Popular accounting software includes:

• Xero
Xero is a cloud-based accounting software designed for small to medium-sized businesses and is known for its user-friendly interface. Your Xero package can be tailored to fit your business by integrating with any of Xero‘s third-party add-on applications. Xero also has a mobile phone app for on-the-go access.
• Sage Cloud Accounting
Sage Cloud Accounting is another offering from Sage and is a more robust cloud-based accounting software designed for small to medium-sized businesses. It is more complex than Sage One for those with more accounting knowledge and need for more features to use. For example, Sage Cloud Accounting also integrates with Sage Payroll, making it easy to manage your payroll and accounting in one place.
• Quickbooks
Intuit Quickbooks is an accounting software options designed for small businesses and users with minimal accounting knowledge. It has a cloud-based version as well as a desktop version accompanied by a mobile phone app. Quickbooks also offers advanced reporting capabilities, making it easy to analyse your business’s financial performance.
• Sage 50 Accounts
Unlike the other packages mentioned above, Sage 50 Accounts is a desktop-based accounting software from Sage. It is designed for small and medium-sized businesses with a more complex interface.

When choosing accounting software, consider your business’s needs and budget. It’s important to choose software that fits your business that you feel comfortable using and which has the features for your bookkeeping process.

It’s also important to keep your software up to date and ensure that it integrates with other tools you use in your business, such as CRM or project management software.

8: Summary

At Bluestone Advisory Ltd, we offer comprehensive bookkeeping services to fit your business. Our experienced bookkeepers understand the types of bookkeeping that your business needs and can give you the templates, training and solutions to perform the bookkeeping yourself or you can feel confident in our ability to reliably, accurately carry this important process out for you in a timely manner.

As accountants who regularly use bookkeeping data, we can harness this information to then measure performance and evaluate risky areas. We can adjust our bookkeeping process to consider these areas in more detail at the outset and so cut-out any re-classifications or duplications of data entry that can be costly and create delays.

If you are looking for a reliable bookkeeping partner for your business we are happy to assist you. Contact us today and let’s grow your business together.

Frequently Asked Questions (FAQ’s):

What exactly does a bookkeeper do?

A bookkeeper’s primary responsibility is to perform the bookkeeping process mentioned above and so maintain the company’s financial records, including recording transactions and reconciling accounts.

What does a bookkeeper do on a daily basis?

The daily tasks of a bookkeeper may vary depending on the business’s size and needs. Typically, they will collect and organise the financial records, then record financial transactions, categorize expenses and income and reconcile bank or credit card statements Additionally, they may be responsible for invoicing and managing accounts receivable and payable. Some bookkeepers may also carry out credit control and prepare payment runs.

Is bookkeeping stressful?

While bookkeeping can be a challenging and detail-oriented task, it does not have to be stressful. By hiring a professional bookkeeper, you can alleviate the stress of managing your finances and focus on other aspects of your business.

Is a bookkeeper an accountant?

While a bookkeeper and an accountant share some similar responsibilities, they are not the same. A bookkeeper manages the recording of a business’s day-to-day financial transactions, while an accountant is responsible for using, interpreting and analysing the data for accounts preparation, auditing and tax preparation.

Do I need a Licence to be a bookkeeper in the UK?

In the UK, bookkeepers do not require a license to practice. However, it is recommended to look for bookkeepers who have obtained a professional certification which can be from the Association of Accounting Technicians (AAT) or the International Association of Bookkeepers (IAB).

What are the advantages of using a bookkeeper?

Hiring a bookkeeper can provide several benefits to small and medium-sized businesses. A bookkeeper can give you confidence in the bookkeeping process and thus the reliability of financial data, organisation of financial records that underpin the management of your business’s finances.

What qualifications should I look for when considering a bookkeeper?

It is essential to look for someone who has experience and a proven track record in the field. Additionally, you may want to consider someone who has obtained a professional certification, such as the Association of Accounting Technicians (AAT) or the International Association of Bookkeepers (IAB).

Why choose Bluestone Advisory Ltd for my bookkeeping?

At Bluestone Advisory Ltd, we pride ourselves on providing personalized and professional bookkeeping services to small and medium-sized businesses and charities. As accountants as well, we also use and analyse the information prepared through the bookkeeping process, so we understand how your information will be used and interpreted. This can make our process more effective as we can cut out the overlaps or adjustments that can occur when using an external bookkeeper.

Also if your business has seasonal business with very busy periods accompanied by slower periods hiring a bookkeeper for a monthly fixed fee and fixed amount of time may not be suitable. We can help with this and adjust to your changing business.

Whether you are performing the bookkeeping yourself, we can provide you with the templates, training and set up of accounting software that tailors to your business’s needs. Contact us today!

What do I do if I want my software, such as Xero set up, Quickbooks set up or Sage set up?

Accounting software packages often have many service options at different prices and also Xero can be accompanied with a variety of Xero‘s third-party applications. We always recommend discussing with your accountant when you want Xero set up, Quickbooks set up or Sage set up for your bookkeeping needs so that you use the right package at the outset.

Before agreeing to a price plan, you should consider familiarising yourself with the interface and its functions by signing up for a free trial, usually this is a 30 day free-trial. This requires you to sign-up with a name, email address, telephone number but no payment details may not be required.

During this time, your accountants should set up or advise on:
• your tailored report templates
• starting or opening balances
• customer and supplier information and transfer transactions from any old spreadsheets or software.
• creating user accounts and Xero login or Sage login or Quickbooks login in details for your staff, which can be set up with different access rights.
• Your accountants should also provide you with or advise on staff training as the bookkeeping and accounting function should be integrated into your everyday business activity.
• Making optimal use of the software to help monitor performance of various aspects of your business.

Please note that during this free trial you are likely to receive telephone sales calls from these software providers and email messages for the paid subscription after the trial period.

During the free trial period, you should always liaise with your accountant with any queries or concerns that you may have and only once you are comfortable using the software functions then you should consider the paid subscription of the software.

If you are considering using an accounting software, feel free to reach out to our experienced, trusted accountants. Let us provide the right solutions for your business or charity. Contact us today!