Your bookkeeping health check

Navigating the complex financial landscape of your business is both vital and challenging.

Ensuring your financial records’ accuracy, integrity, and compliance is critical to maintaining a healthy financial system.

You should run a business financial health check periodically.

An annual report is prudent for the success of your business, but you may run a check more often if you are snowballing.

Not sure where to begin? Let’s talk about the importance and the steps required to check the financial health of your business.

Table of contents

What is bookkeeping?

It is the ongoing recording of financial activities in an organised manner.

This involves purchases and sales and all types of expenditure and income.


Traditionally, bookkeepers recorded transactions in physical books identified as account books or ledgers, therefore the name bookkeeping.

Some companies still use this approach.

But with the development and expansion of computer technology, programs, databases and remote data storage resources, accounting documents are increasingly kept in time-saving and practical digital media formats.

Whether the financial records remain in hard copy documents or digital form, more established procedures must be established regulating how they are organised and presented.

There are two processes in bookkeeping, single-entry bookkeeping and double-entry bookkeeping.

Reasons why your business needs a bookkeeping health check

1. Improve financial decision-making

Precise and up-to-date financial data is the foundation of informed decision-making.

An accounting health check evaluates the precision and dependability of your financial data.

By guaranteeing the accuracy of your financial information, you can make more effective strategic choices to propel your business forward.

This involves determining areas where cost-saving measures can be implemented, improving cash flow, and assessing the profitability of different company initiatives.

Enhanced financial decision-making ultimately improves the general effectiveness and profitability of your company.

2. Strengthen investor confidence

Whether you are looking for investments or already have shareholders on board, a financial health check can be essential in fostering confidence in your stakeholders.

Investors want to be sure that their capital is in secure hands and that your financial reporting is precise and transparent.

A meticulous accounting health check can show your dedication to financial integrity, reassuring shareholders and possibly enticing new ones.

Strong investor confidence can open doors for development possibilities, collaborations, and greater access to capital.

3. You learn in the process

It doesn’t matter if you’re an entire newbie or an accounting veteran. Doing bookkeeping health checks provides many opportunities to learn and fill in some knowledge gaps.

It can teach you a lot more than you are thinking about your business finances. Everything you acquire will help you make better business choices.

4. Keeps you prepared for tax

As annoying as it is, companies must file their taxes at the end of the tax year.

By conducting bookkeeping health checks, you’ll have financial data ready for tax season and won’t face any legal issues.

So, when HMRC requires a financial statement from your company for tax reasons, bookkeeping regularly indicates you’ll be able to foresee the outcome more accurately if you maintain comprehensive balance sheets over time.

5. Easier to see business targets

Every company wants to grow, but financial failures can stop that from happening at the rate you want.

With no precise amount of data to evaluate, it’s not easy to set yourself improvement goals.

By performing bookkeeping health checks regularly, you can stay on top of the financial insights to set better targets and maintain regular financial records.

How does a bookkeeping health check work in the UK?

1. Financial document evaluation

The process starts with an in-depth assessment of various financial records.

It involves ledger reviews, income statements, and expense records that guarantee accuracy, appropriate categorisation, and recognition of discrepancies in economic data.

2. Examining transaction records

A meticulous review of transactional records takes place.

It entails confirming the accuracy of every transaction and discovering any potential mistakes or discrepancies in financial data.

3. Bank statement reconciliation

Detailed reconciliation of bank statements with the accounting documents is performed.

It seeks to ensure the synchronisation of transactions in both records and examine the correctness of the recorded financial data.

4. Compliance review

Bookkeeping practices are evaluated for adhering to financial regulations and accounting norms.

This phase is essential for maintaining adherence to statutory requirements.

5. VAT assessment

This segment concentrates on the precise maintenance and reporting of Value Added Tax (VAT) documents.

A comprehensive examination ensures proper VAT reporting in accounting records.

6. Financial statements evaluation

The evaluation goes to a comprehensive examination of financial statements, such as income and cash flow statements.

This in-depth examination verifies the reliability and accuracy of these essential financial documents.

7. Expense reporting procedures

A complete review of expense reporting processes ensures that costs are accurately monitored, recorded, and reported according to pertinent financial guidelines.

8. Accounting software review

The effectiveness and efficacy of the accounting applications in use are assessed.

This review seeks to ensure the optimum efficiency and effectiveness of the software for handling financial data.

9. Recommendations and improvement

The procedure concludes with suggestions and proposed improvements.

Corrections are made for any errors, along with the ideas to improve bookkeeping practices.

10. Documentation of findings

All findings, evaluations, and suggested modifications are recorded for future reference and auditing reasons.

The goal is to lay a solid basis for financial health and compliance with best accounting practices.


Final thoughts

As an expanding business, ignoring your financial health checkups can lead to mistakes.

As income streams develop and the company’s costs change, it can take time to figure out the heads or tails of whether you are on the right track.

A bookkeeping health check ensures the financial well-being of an organisation, guaranteeing compliance, accuracy, and transparency.

You can also hire an experienced accountant to conduct such checkups, as they can do everything from keeping your payroll to providing CFO-level knowledge of your financial habits.

123Financials Editorial Team
The 123Financials editorial team is composed of seasoned finance and accounting experts with a combined experience of over 20 years. Specializing in UK finance, accounting, and tax-related content, our team is dedicated to delivering insightful and practical advice to startups and small businesses. With a strong background in both the theoretical and practical aspects of financial management, we ensure that our readers stay informed and empowered to make sound financial decisions. Whether it’s navigating the complexities of UK tax laws or providing strategic financial planning tips, our team is committed to excellence and accuracy in every article.