Bookkeeping records to produce a set of accounts at the end of the financial year to show the sales turnover, business expenses and the net profit for tax purposes is an essential function of every business enterprise. Medium and larger businesses employ accounts clerks, bookkeepers and accountants to maintain the financial records and produce regular accounting information. Many small businesses chose to do the bookkeeping themselves or outsource the accountancy work.
Small businesses and in particular self employed business have a choice in how the financial accounts are prepared and produced. A small business may employ the services of a bookkeeper to produce the accounts while another similar business may keep a manual record of financial transactions while a third option is to use a bookkeeping software system.
Small business has a choice as to how it produces its financial records. Some simply do nothing but the best option is to make a finite decision regarding the path to take. Financial accounts, financial control over the business activities and the knowledge of how well or badly the business is performing is crucial to success in the business environment.
The underlying necessity is that if the small business does not take a decision on its financial accounting then at the very least it must accumulate documents of prime significance such as sales invoices, purchase invoices and possibly bank records during the financial year and assemble these into some sort of order after the end of the financial year for tax purposes. Failing to keep financial records often results in a succession of administrative burdens and often also leads to financial penalties if taxation deadlines are not met.
A minimum of a manual record of accounting records is required should the smaqll business not use bookkeeping software or ut