The value of bookkeeping software for small businesses

For a lot of small business owners, bookkeeping is one of those boring chores you’ll do anything to put off until tomorrow. Of course, tomorrow never comes and the task becomes even more unappealing as the days go by.

With the introduction of Making Tax Digital (the government’s scheme to move tax filing online, starting with VAT reporting), now is the perfect time to consider other ways technology and modern accounting and bookkeeping software can help improve the management of your business finances.

If you’re still on the fence, let’s take a look at some of the ways complete accounting software or simple bookkeeping software can make your life easier.

How does bookkeeping differ from accounting?

Bookkeeping is the vital first step to ensuring your business meets its accounting and statutory filing responsibilities. This means recording the money coming into and out of your business, including your sales or invoices, and your expenses.

Once you have this information, you organise it to help you make decisions about your business to help it grow or become more efficient. This part is called accounting.

Accounting is also about ensuring you meet your responsibilities to report your financial performance to shareholders, Companies House (if you run a limited company) and HMRC as required by law.

For more on this, check out our article ‘What is bookkeeping, and why does it matter?’

We may not be able to make bookkeeping fun, but we can definitely make it easier.

At Crunch, we have a range of solutions to help you whatever stage you’re at with your business, including:

• Crunch Chorus, our free self-employed community that helps people just starting out with information, tools and jargon-free guides
• Crunch Free – free bookkeeping software, our free online bookkeeping software for limited companies or sole traders
• Crunch Limited Company and Sole Trader packages, our complete software, service, and advice packages for all types of business.

Clarity and ease

The greatest advantage when it comes to online bookkeeping or accountancy software is how easy it is to enter and access information about how your business is performing. Of course, your software won’t be able to do it all by itself – you’ll need to keep things up to date, and you may need the help of an accountant to make sense of the data, make well-informed financial decisions and keep on top of your financial reporting and statutory filing obligations. Thankfully, this usually only requires small, regular input from you.

As with anything, you’ll get out what you put in – for those dedicated to keeping everything updated, you’ll be rewarded with simple, clear and accurate information about your business finances and tax obligations. Bookkeeping software is designed to make the process simpler, after all. Our free bookkeeping software lets you easily send invoices and record all your expenses to see how your business is performing. When you need more information, or if you need to start preparing statutory accounts and reports for your business, it’s really easy to upgrade to one of our complete accountancy packages for limited companies or sole traders.

Helping you with VAT records and filing

Speaking of which, bookkeeping software can help you better understand when you need to start thinking about registering for VAT – and help you decide what VAT scheme is best for your business.

Legally, you must register for VAT when your business’s VAT-taxable turnover exceeds the current threshold of £85,000 over a 12-month rolling period. Similarly, if you expect the threshold to be exceeded in the next 30 days, you need to register. Without a reliable way of tracking your turnover, you might end up on the wrong side of HMRC – and you definitely don’t want to end up there!

If you’re registered for VAT, you need to make sure that your accounting software is compatible with the requirements of the government’s Making Tax Digital regime. This means that your VAT records are stored digitally and are sent to HMRC automatically each quarter.

A clear understanding of your tax liabilities

With your business information stored neatly and accurately online, you’ll be able to quickly work out exactly what your tax liabilities are and how much you need to set aside to pay HMRC.

This is an invaluable asset for a lot of small business owners who operate a limited company – with a clear idea of how much you’ll be expected to pay in Corporation Tax and VAT for your business, you’ll be able to budget with absolute confidence. It’ll also make things a lot easier when the time comes to get the information you need about the salary and dividends your company paid you in the tax year to include in your annual Self Assessment.

Our unique services also enable sole traders to prepare their annual Self Assessment tax return with real-time information about their income from self-employment.

Know what dividends you can take from your limited company

Of course, the other great part of knowing how much you need to pay in company taxes is knowing how much you can put in your pocket. Our Crunch Free bookkeeping software will let you see your income and expenditure, but you’ll need the complete online accountancy software that comes with our Crunch limited company packages to give you a clear idea of your company profits, what tax you need to pay, and the amount of dividends you can take from your company.

It’s worth remembering that it’s illegal to pay a dividend if your company doesn’t have sufficient profit after tax to cover the dividend amount. Accountancy software helps eliminate that risk, so there’ll be no difficult conversations with the taxman. Our handy knowledge article explains dividends and what tax you need to pay on them.

Easy bank reconciliation

Bank reconciliation is an important part of life as a small business owner. It’s a small, simple job that can have a big impact on your records and tax liabilities.

To reconcile your bank statements, you need to get all your bank transactions and match them against your recorded expenses and sales invoices. This can be frustrating work, especially since even a single missing penny can cause disarray. With online bookkeeping software, the job becomes far, far simpler.

At Crunch, we have secure links with a number of banks, so you can have all your business banking transaction data imported straight to your accountancy software (and the functionality is soon going to be available in our free Crunch bookkeeping software too), which then intuitively suggests a match in the expenses you’ve recorded or highlights any discrepancies. There’s no need to pore over paper records and drawers of receipts – you can just rattle through your bank reconciliation in a few mouse clicks, safe in the knowledge that everything is accounted for.

Crunch – simple and free bookkeeping software

Crunch Free is the perfect solution for new limited companies and sole traders who prepare and file their own, simple accounts. If you already have an accountant but don’t have a way of keeping your invoices, expenses, and digital records organised, Crunch Free also has you covered. You can record your expenses, upload receipts, issue invoices, and access your digital records anytime, anywhere.

Our simple software can also help you save time and reduce your administrative duties, allowing you to automate recurring invoices and streamline your company’s basic bookkeeping processes.

If you’re looking for a little more help from real people, you can quickly and easily upgrade to our complete Crunch Sole Trader or Crunch Limited Company accountancy packages, which include ongoing support and expert advice from designated client managers and accountants.

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