Small businesses are required to keep bookkeeping records to produce a set of accounts to show sales income, business expenses and net profit for tax purposes at the end of the financial year. Medium and larger businesses employ a number of accounts clerks, bookkeepers and accountants just to maintain their financial records and produce regular accounting information on a monthly, quarterly, and annually basis. Small, self employed businesses have a choice on the preparation and production of their financial accounts. They may employ the services of a bookkeeper to produce accounts in the first business while keeping a manual record of the financial transactions on the second while using a bookkeeping software system on the third one.

There are several advantages and disadvantages in producing the financial accounts. Financial control over the business activities and knowledge of the performance of the business is crucial to success. Failure in keeping the financial records results in a succession of administrative burdens and leads to financial penalties if taxation deadlines are not met. If the small business owner chooses the use of bookkeeping software or outsourcing of the financial function to a bookkeeper or accountant, manual records must be kept. The major disadvantage of a small business keeping manual records is that lost documents may result into over declared profits and taxes, inaccurate fines and penalties, and reduced financial control within the business during the financial year to a minimum of zero. Disciplined recording of the financial information on a regular basis must be attained when adopting a manual bookkeeping system; it is to see and understand the financial position of the business to be able to take positive action at the earliest opportunity to achieve satisfactory financial results.

An advantage of having bookkeeping software is that it is more likely keep regular up to date accounts and it is more likely to provide a fixed set of disciplines and produces types of records the business requires for the preparation of regular financial statements and year-end tax returns. Records tend to be less likely to be lost; the packages can be backed up but essential financial performance can be improved by greater financial control. Bookkeeping software comes in formats from a simple spreadsheet to complex data based accounting software.

For a small business, the software of choice is a simple system requiring limited accounting knowledge but must be a package producing the desired result. The software automates the manual keeping of financial records. One must then prepare a regular financial record to improve its financial control, to take financial decisions and achieve desired outcome. The financial records are maintained and regular financial reports are produced. It may be the best solution for a business with a volume of paperwork.

A disadvantage in using a bookkeeper is that the business owner may remove themselves from the detailed records. The second view of the accounts can be important; errors in the management judgment can be noted and bad practices become more evident. Missed documents are more noticed if the owner produces his own records than if being done by an accountant or bookkeeper. A manual bookkeeping system may be sufficient but it may be better served using bookkeeping software to increase financial control and performance.