
Do I need accounting software for my small business?
June 30, 2021Do I need accounting software for my small business?
Doing your own accounts
Accounts payable | Any money you owe to vendors or suppliers. |
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Accounts receivable | Money owed to you for goods or services you've provided. |
Accrual | Recording expenses or revenue that hasn't been accounted for yet. |
Balance sheet | Also known as a ‘statement of financial position’, a balance sheet is a document that reports your assets, liability and net worth. |
Bank reconciliation | If the balance in your accounting system doesn’t match the balance on your bank statement, you’ll have to find the difference and make it up. Accounting software can automate this process. |
Capital items | An item that has a long-term effect on your business (such as machinery or office equipment like laptops and mobile phones) is classed as a capital item. Unless it is an item of considerable value (generally speaking more than £1,500), it can be recorded as a small equipment cost in the normal way. |
Cash flow | The net amount of money that moves in and out of a business each month. |
Dividends | A distribution of a company's profits to its shareholders. You will have an additional £2,000 tax-free allowance for your dividend income, meaning that sometimes paying yourself in dividends will allow you to pay less in tax. |
Equity | The value of a company if all assets were liquidated and any debts were paid off. |
Gross profit | Total sales minus the cost of the goods and services sold. |
Invoicing | The record of a transaction between a buyer and seller. |
Net income | Total profit minus all costs, expenses and tax. |
Payroll | A list of all employees and their salaries. To be complaint with PAYE, this needs to be run every month. |
PAYE | The Income Tax and National Insurance deductions that need to be calculated from the company employees' monthly salaries. |
Revenue | The total amount made from selling goods or services, without taking into account any expenditure. |