Accounting software

How to keep business accounts

Guide

In order to run any business, you need to keep accounts or pay someone to do this for you. Keeping accounts is a legal requirement, but keeping them well is vital to running your business effectively. There are many ways of keeping accounts, including:

  • paper-based accounts
  • spreadsheet accounts
  • computerised accounting packages

Paper-based accounts

Traditionally, accounts were kept on paper with handwritten entries. Many small businesses relied on the traditional methods of bookkeeping, often using specially printed books to organise records. However, handwritten accounts can take a significant amount of business time and it is easy to make mistakes.

If you currently keep paper records such as a notebook or paper receipts, you can continue doing so. However, if you are a VAT-registered business, from your first accounting period starting on or after 1 April 2022, you must also keep your records of sales and purchases digitally. If you haven't already signed up for Making Tax Digital for VAT, you must do so now. Find out more about Making Tax Digital for VAT.

Accounting spreadsheets

You can set up computing spreadsheets to keep accounts. They can do the sums for you and update all data in a series of spreadsheets simultaneously. However, designing and maintaining a spreadsheet accounts system can be a significant task. Mistakes made in a spreadsheet may go unnoticed and not get corrected until the end of the year.

If you choose to keep digital records on a spreadsheet, then you must also use bridging software to make sure your spreadsheet is Making Tax Digital compliant. You can use the HMRC online service to search for bridging software.

Accounting software packages

The ease and efficiency of accounting software generally make it a better choice for most businesses. If you choose carefully, the right package can:

  • save you time and money
  • reduce mistakes in your calculations
  • help you gain insights into your business that you would not easily see in paper accounts

A software package that is compatible with Making Tax Digital for VAT will also allow you to keep digital records and submit VAT returns, to ensure that you meet your responsibilities towards HMRC. To find out more, watch a video about getting compatible software.

Read more about the advantages and disadvantages of accounting software.