If you are running your own business, regardless of size, accounting is a legal requirement of HM Revenue and Customs.
Basic records to keep
Your basic records will normally include:
- a record of all your sales, with copies of the invoices you have issued
- a record of all your purchases and business expenses
- invoices for all your purchases and business expenses
- details of any amounts you personally pay or receive from the business
- copies of business bank statements
You or your accountant will use these records to create a profit and loss account, which shows the sales income you have received and the expenses you have paid, and the profit and loss you have actually made. Your tax liability will be based on this.
Other records to keep
Every business is different and there are many specific types of detailed records that may need to be kept. Some examples of records to keep include:
- pay book
- petty cash book
- order notes and invoices
- copy sales invoices
- details of any other business income received
- details of any private money coming into the business
- up to rolls or other form of electronic sales record
- details of any other income
- any cash taken out of the box to pay for small business expenses
- invoices and invoices for purchases and expenses
- a record of stocks available at the end of the year
- all bank and mortgage company statements, credit books, check stubs and pay stubs including details of business transactions
If you do not keep accurate and complete records, you may end up paying more taxes than owed due to lack of evidence of tax deductible expenses and / and inaccurate sales records that cause HM Revenue and Customs to evaluate your expected sales. If you pay an accountant to prepare your accounts, they will charge you based on the time it takes. If their records are more accurate, this will reduce the time required and therefore reduce the amount they charge.
The above reasons are enough to make sure you keep good books and records, but the most important reason is to make sure that you are in control of your business and that you can assess your profitability and cash flow situation, therefore making sure you are aware of any potential issues as soon as possible. as possible and can make business decisions with all the information available.