The importance of keeping good records and receipts
For many small businesses bookkeeping can be an unwelcome distraction from their core work. PBH Accounting explains why it’s vital and the best way to keep those books up-to-date.
We know it can seem hard to do, but little and often is best. We suggest a couple of hours a week to update a record of your receipts and invoices, otherwise you could miss out on tax deductions or potentially understate income (which could lead to fines and penalties).
To show just how serious this could be for you, in a recent tax case HMRC was suspicious of the amount of business expenses that were claimed by a surveyor. HMRC requested to see a backup for their claims i.e. receipts, bank statements, etc. The business owner stated that as they had ceased trading they no longer had any records.
However, it is important to note that the law requires records to be kept for at least the current and previous 4 years. The onus was on the surveyor to prove the numbers they had provided were correct and unfortunately in this case they could not provide the information and therefore lost the case, paying fines for non-compliance.
So I need to keep decent records, but what are the choices for my business and why?
The answer to this depends on your budget, how confident you are in IT and what your future growth plans are.
For small businesses where budgets are tight an excel spreadsheet will suffice to record income and expenditure. Remember to also keep all your receipts (scan them in and back them up if possible).
For medium-sized businesses or if your plans are to grow your small business, then a computerised system may be more appropriate in order to track debtors, creditors, file VAT returns and deal with RTI (Real Time PAYE filings for employees). These packages vary and the price depends on the functionality you need. In general prices vary from £3-£20 per month. They often entice you by providing a free introductory period, which can be useful for trying out the best system for you.
In recent years there has also been an increase in the number of cloud-based accounting packages which allow you to track or submit your expenses on the go, from your mobile or tablet. This is obviously not free, but it is useful for those cash expenses you incur on the move. The information is live so you can see how your business is performing, which invoices have been paid and which are still owed. There are lots of cloud-based products on the market, but we use and are a certified practice for Xero: www.xero.co.uk
A good accountant should be able to give personalised advice on the right system for your business, at each stage of its growth. They should keep offering advice as your business needs change. PBH Accounting will do this for every business we work with. We can also offer a full bookkeeping service, if you’d rather just not worry about this side at all.
Keeping records of income and expenses is absolutely key and for a lot of people they are happy to do these themselves, but what about using them to fill out your tax return?
You can certainly fill out a tax return yourself, but you might not have the expertise to account for the transactions correctly and capture all available tax deductions. Using a trained chartered accountant with many years experience is likely to yield great benefits, saving you time and money. A good accountant will also be available throughout the year to offer advice for the financial side of your business.
Contact us for a free chat and quote to show how we can help, leaving you to concentrate on what you do best: running your business.
Personal service every time
Contact us at hello@pbh-accounting.co.uk or call 01223 291408
