Bookkeeping basics for small business

At its core, bookkeeping means recording every sale and purchase, keeping the receipts and invoices behind them, reconciling your bank transactions regularly, and keeping business money separate from personal. Doing these four things consistently gives you accurate numbers for your VAT return, year-end accounts and tax bill, and is the foundation everything else in your finances is built on.

Keep every sales invoice, purchase receipt, bank statement and record of business expenses, digital copies are fine. HMRC requires you to keep these for at least five years after the 31 January submission deadline for the relevant tax year, so they can check your figures if needed.

Weekly is ideal for most small businesses, monthly at the very least. The longer you leave it, the more transactions pile up and the easier it is to lose or forget a receipt. Regular bookkeeping also means you always know roughly how your business is doing, not just at year-end.

You can for a very small, simple business, but spreadsheets are not Making Tax Digital compliant once you register for VAT, and they are easy to break with a wrong formula or accidental edit. Cloud software connects directly to your bank feed and keeps a proper audit trail, which spreadsheets do not.

Open a separate business bank account, pick one piece of cloud software, and set a weekly slot to reconcile transactions and file receipts against them. Starting simple and consistent from day one is far easier than trying to reconstruct months of records later.

The most common are mixing personal and business spending, letting the bank feed go unreconciled for months, losing receipts, and leaving everything until the VAT return or year-end is due. Each of these is avoidable with a simple weekly routine, or by handing the job to a bookkeeper.