Now that the credit crunch is really digging its heels in, there’s no doubt that things are going to get worse before they get better for the majority of British businesspeople. Recent forecasts warn of a winter recession, while a survey of British workers revealed that many are now experiencing sleepless nights over financial concerns.

Whilst lack of sleep may not be an effective way of safeguarding your livelihood, it is also a very bad idea for business people to ignore the problems they are facing. For those who are struggling in the current economic climate, the most important thing is to monitor the progress of their business with effective bookkeeping and to react swiftly to any warning signs.

Here are five reasons why small businesses need to put even more emphasis on bookkeeping during the recession:

1. Monitor and Control Expenses

Now more than ever, it is important to watch the level of expenditure and not to let it get out of control. Regular accounting will tell you how your expenses are running when compared to your targets, and will also allow you to compare monthly income against monthly expenditure.

2. Save Time and Money

Talking of levels of expenditure, the cost of an accountant to prepare your Annual Accounts and Tax Returns is based upon the time it takes to do the work. It follows, therefore, that if you can reduce the accountant’s time by doing much of the work yourself, you will reduce the fee. If you do all the basic bookkeeping and present to an accountant simply an annual summary asking just for your Self Assessment Tax Return to be completed, you will have saved the accountant a lot of time, and yourself a lot of money. A time-saving self assessment software can be a wise investment.

3. Claiming Expenses against Tax

UK tax regulations provide for expense claims to be allowed for monies spent in the normal course of business. Many people who work from home are self-employed. These two areas give rise to a wide range of legitimate expense claims where expenditure previously classed as ‘private’ now become ‘business’ and, as such, will greatly alter the level of profit and tax payable. However, without a proper set of accounts and records, such expenses cannot readily be quantified, and certainly cannot be substantiated if req­uired at a later date.

4. Getting an Initial Tax Refund

Many self-employed people start work on a part-time basis while still maintaining a full-time job elsewhere. Almost inevitably this ‘day job’ will be taxed under the rules of PAYE. Often the first year or so of self-employment will result in an excess of expenditure over income termed a ‘tax loss’. At the end of every tax year, all income is pooled from whatever source and the total tax bill recalculated. By bringing in a tax loss and setting this off against tax already paid, a tax repayment not only pays the accountant’s bill, but also is a way of recovering part of the initial investment into the business. Remember, however, without any accounts you cannot calculate the ‘tax loss’, and you will miss out on the self employed tax repayment.

5. Borrowing Requirements

From time to time, and potentially during an economic downturn, the need to borrow will arise. It may be a new mortgage or money for the business but, in all cases, the lender will want to know the levels of income and profit to support the loan. No accounts = no evidence = no loan!

Daniel Egerton writes content on behalf of SamsTax, a company providing online self assessment software to help self employed and small business people keep track of their income and expenditure with ease throughout the year.

In direct opposition to this situation is the example of a firm that deals in a much more tangible product, namely shoes. A shoe company does not necessarily need to have a complete, microscopic view of the company accounts. In this scenario, there is a focus on knowing the inflow and outflow of revenue, value of assets and stock and so on.

In both cases, different business models necessitate different accounting needs. This is exactly why it is important for bookkeeping firms to offer customised solutions to different businesses and organisations.

KPI Bookkeeping is a Melbourne-based firm that can help you significantly reduce your bookkeeping costs. The staff at KPI Bookkeeping are all qualified accountants and have the experience to help you with all of your bookkeeping needs. For more information on Bookkeeping and other related services, please visit the company website at

http://www.kpibookkeeping.com.au. The company has a variety of bookkeeping service options for businesses and Non profit organisations.

Chris Garner was an accounting specialist in a reputed company for 8 years. His experience in the accounting field has led to expertise as an accountant. He is also passionate about writing. He combines the two to provide interesting and informative articles.
www.kpibookkeeping.com.au