top of page

Bookkeeping Guide

⚠️ Find out why almost all UK businesses will soon use cloud bookkeeping apps:
How MTD for Income Tax will affect small businesses

Top tip 💡 get ready for MTD by reviewing your business banking

What bookkeeping software is best for your business?

Our top recommendations are:

Xero LOGO Massey Accounting Company, Stockport

Ideal for VAT registered businesses with turnover above £85,000 (including those moving towards VAT registration). The Standard Plan suits most businesses: Pricing Plans | Xero UK

PANDLE LOGO Massey Accounting Company, Stockport

Best suited to small non-VAT registered businesses and landlords. Includes a free plan, but you'll probably find the bank feed feature worth the small monthly cost: Plans & Pricing - Pandle UK

The alternative (entirely free) solution


Whilst not suitable for all businesses, very small sole-traders, single-director companies and landlords might be able to combine their banking and bookkeeping solutions with two free offerings from Mettle, see: Choosing your business bank account 💳

Our guide to how to do your own bookkeeping

Non-VAT registered small businesses usually favour using the cash accounting method. If you're using a bookkeeping app, things couldn't be easier.


  • Sales: Generate your Sales Invoices using a bookkeeping app, then corresponding customer receipts can be matched to those Invoices as the app imports the bank transactions.

  • Expenses: The bookkeeping app will import your bank transactions. Your job is simply to categorise each payment, as, for example, "materials/purchases, wages, stationery, motor expenses etc."

  • Keep it simple: Run every transaction through your business bank account, and there will be no need for extra cash / "out-of-pocket" expenses to be entered manually.

VAT registered or larger businesses must use accrual accounting, but, software will help tremendously.

  • Expenses: You'll need to differentiate between those for which you have a Purchase Invoice (aka Bill) and those paid without a Bill (such as bank charges).

  • VAT: Select the correct VAT code for each transaction (not all zero-VAT transactions are created equally), see our full guide to VAT codes.


Some additional tips for Xero users

  • Where a supplier provides a Purchase Invoice (Bill), you should enter these into Xero (I’d advise giving each purchase invoice your own reference number, entering that into Xero, and filing in that order): See: Manage Bills and Purchases in Xero - Xero TV

  • Next pay your Bills (this can usually be done by returning to DASHBOARD > BANK > RECONCILE: Xero will make suggestions for payments that seem to match your bills.

  • Finally, you’ll have some payments left in your bank account for which you haven’t received bills (e.g. bank charges, certain direct debits etc.). Again via RECONCILE, simply complete the boxes Who, What and Why to categorise these payments into the correct Profit & Loss categories (Nb: Try to be consistent as much as possible with where you categorise your expenses. Consider setting up Bank Rules.)

You can learn more about the theory behind cash vs accrual accounting in this video 

Need a little support as you learn to keep your own books? 📕 Please get in touch 🙋‍♂️

bottom of page