Things get a little more complicated once you start employing people, because you'll have to look after their salaries as well as the general company accounts.
You'll have to manage the deduction of their tax at source, payment of employer and employee National Insurance contributions, plus any pension schemes, bonus arrangements and non-salary expenses.
It is possible to handle the accounts of a small company without a computer - after all, that's what was nearly always done until the 1980s.
But it's certainly not recommended. Computerised bookkeeping will save you time and money and allow you to track down and correct errors quickly and easily. Such software packages have the added advantage that they let you plot graphs of profit and loss or income and expenditure, track overdue payments (both incoming and outgoing) and the more advanced tools can even automate the submission of the relevant forms to HMRC.
For smaller businesses, software packages such as QuickBooks are ideal; realistically, QuickBooks can be used for companies of up to 20 employees, as can other products on the market such as Sage Instant Accounting/Payroll. Don't be put off by the relatively low cost of these packages.
They really are powerful accounting tools that can double as business assessment and stock control systems, giving you a real feel for which areas of your business are doing well and which are failing. For the sake of convenience, it's best to ask your accountant which software package he or she prefers to use and then buy that one for internal use.
Note that your accountant won't do the donkey work of everyday data input for you, unless you're prepared to pay extra - a lot extra. What they will do is take the figures you have provided for the year and plug those into various forms to tell you the amount of money you have to pay for each class of tax.
For a small business, a good accountant should charge no more than £500 to £1,000 per year for this service. Obviously that cost will rise as the size of your business goes up, but the more work you do in-house, by entering income and expenditure data into the accounting software, the cheaper it will be.
A word on accountants. Some are good, some are less than good, and price is rarely a good indication of quality. Always go for a Chartered Accountant and preferably choose on the basis of a friend or colleague's recommendation. A good accountant should make recommendations as to where you can save money, in addition to completing the relevant forms and dispensing advice as needed throughout the year.
Although it can seem as though there's an endless array of forms to be completed and taxes to be paid, in fact there aren't really so many. If you bear in mind the following basics, you won't go far wrong.
1) During the tax year you must;
Deduct the correct amount of PAYE from your employees' pay.
Work out how the amount of National Insurance contributions that you and your employees have to pay.
Keep a record of your employees' pay and PAYE and NICs due.
Make monthly or quarterly payments of the total PAYE and NICs due to the Accounts Office.
Manage VAT Return completion and payment on a quarterly basis.
2) At the end of the tax year you must;
Send details to HMRC office about expenses you have paid to employees or benefits you have provided (forms P11D and P9D).
Give each employee (who has paid PAYE or NICs and is still working for you at the end of the tax year) a certificate showing their pay, PAYE and NICs details (form P60).
Give each employee a copy of the information you have given HMRC office about their expenses payments and benefits provided (duplicate of form P11D).
3) At the end of your company's accounting year you must;
Send a Formal Return for your company's accounts to the HMRC office.
You should receive copies of the Employer's Bulletin from HMRC along with the Employer's Annual Pack. Ask for them if you haven't received them within a month or so of starting your business, as these provide useful tips on the above duties, plus contacts and advice for business owners.