Every business has a requirement to keep accurate and timely records. Failure to maintain these will not only result in penalty charges from HMRC, but could also result in the company losing money and maybe even failing.
Although a business owner has a variety of tasks to complete in order to build a successful enterprise, just taking a small amount of time each day or week will help you to stay on top of the books. Preparing the records periodically will mean that it will take far less time to complete the year end accounts, and also cost less if you outsource accountancy.
Accurate records will make it easier to monitor your cash flow, allowing you to spot any potential problems early. It will also be possible to create a tax-efficient company, minimising your tax bill, as all applicable reliefs, allowances and expenses can be claimed. HMRC conducts random checks on business records and, if they are found to be inaccurate or poorly kept, you could be fined.
What do you need to record?
A tax return is completed and submitted to HMRC every year, using all the information you have compiled throughout the year. You will be expected to know how much income you have received and also the amount of expenditure.
To do this you need to file all invoices and proof of expenditure as soon as they are received. Maintain invoices in date order, so that you can easily check to see if any are outstanding. Receipts need to be kept for all expenses connected with the company, including travel, supplies and office space. If you are unsure what you need to retain, consult your accountant for more information.
Set up a system
If you have a good system in place, regular bookkeeping will be simple. You could use software to help organise business records, or you could outsource to a professional. Rather than filing receipts, invoices and other documentation, you could scan and store them online. This will reduce the likelihood of loss and make it easier to run reports.
Keeping business records separate
To reduce the likelihood of confusion, keep finances for the business completely separate from personal finance. Set up a business bank account so it is easier to see what is paid into and out of the account.
Make it a habit to deal with business records on a regular basis, so you avoid penalties and charges from HMRC. Contact us for more details.