If the word “accounting” bores you, you’re not alone. For many small business owners, bookkeeping and tax returns are often the least exciting part of running a business – but they’re also some of the most important. So let’s break it down. What is accounting for beginners and why is it a necessity for your business?
In our article, we’ll explain the core concepts, bust some myths, and show you how getting your head around accounting for beginners (even just the basics) can transform the way you run your business.
Let’s start simple. What is accounting? At its core, accounting is the process of recording, classifying, summarising, and interpreting financial information.
In plain English? It’s simply keeping track of your money – what’s coming in, what’s going out, and what’s left over.
Accounting isn’t just a “tick-box” exercise for tax time – it’s a valuable tool to help you understand the health of your business, spot problems early, and plan for the future.
Now that we’ve answered the question “what is accounting?”, let’s talk about why it matters.
You might think accounting is only for big businesses with finance departments. But even if you’re a one-person operation, keeping proper records is a must.
Accounting isn’t a one-size-fits-all term. There are different types, each serving a different purpose. Here are a few every business owner should understand when it comes to accounting for beginners:
This is the traditional side of accounting – producing reports like your profit & loss and balance sheet. These are used by HMRC, Companies House (if you’re incorporated), and external stakeholders.
This is more internal and strategic. It focuses on cash flow forecasts, budgets, and performance metrics to help you run the business more effectively.
As the name suggests, this is all about tax – calculating what you owe, finding legitimate deductions, and ensuring you meet deadlines. An accountant helps reduce your tax bill legally and efficiently.
This is the foundation of all the above. Bookkeeping is the day-to-day task of recording transactions and keeping your records accurate and up to date.
You don’t need to be an expert in each of these areas, but expertise is ultimately what will help you grow. For now, understanding the basics helps you spot gaps—and know when to bring in help.
It’s easy to make accounting mistakes when you’re new to it. Here are some of the most common ones we see, and how to sidestep them:
Keep your business and personal expenses separate. Always.
Tip: Open a dedicated business bank account from day one.
Receipts are proof of business expenses. Without them, you might miss out on tax deductions.
Tip: Use a receipt scanning app to keep records organised on the go.
Trying to “do the books” the night before your tax return is due? That’s a recipe for errors.
Tip: Schedule a monthly review to update and check your accounts.
There’s a difference between understanding accounting and doing it all alone. DIY accounting can cost more in the long run.
Tip: Invest in a qualified accountant to support your business’s financial health.
If you’re just starting out, don’t overcomplicate things. Here’s a simple, no-fuss approach to get going:
Cloud accounting platforms like Xero, QuickBooks, or FreeAgent are beginner-friendly and automate a lot of the process. Many are MTD (Making Tax Digital) compliant.
This is how your income and expenses are categorised. Your software usually helps you with this when you start.
Log payments, send invoices, and match bank transactions every week to stay on top.
You must legally keep records for at least six years. Digital storage (with backups) is the way to go.
A good accountant will save you time, reduce your tax bill, and keep you compliant. They’ll also help you understand what the numbers actually mean.
So – what is accounting? It’s the financial backbone of your business (and your personal life). Whether you’re self-employed, running a growing limited company, or just launching your side hustle, accounting gives you the visibility and control you need to succeed.
The good news? You don’t need to be a maths genius or finance whizz to get started. With the right tools and advice, accounting can become one of your business’s biggest strengths – not just something you dread at year-end.
Did you find our accounting for beginners guide useful, or do you still need help setting up your accounts or understanding the numbers? We’re here to support you. Let’s take the stress out of finances so you can focus on what you do best – running your business.