Business record keeping

Introduction

A key component of running any type of business, including when you run your own company, is business record keeping and knowing how to maintain business records. In the main, this will include the basic bookkeeping and maintaining the financial records for the business. However, there are other company records to maintain too, such as health and safety, employee records including personal details such as national insurance numbers, GDPR requirements etc. In this article we will focus of how to maintain business records including financial information.

If you are a sole trader, or a company director starting up your own company for the first time, it is important to know from the outset, which records you should keep and how to maintain your business records, on an ongoing basis. What’s more, you also need to know how long to keep your records for.

Keeping organised

If you organise your business well and keep good accurate accounts records, this will stand you in good stead. When you do so, you will have an overall view of your company’s financial position. Indeed, you can view this at any moment in time.

It should be every contractor and small business owner’s aim to follow the above. Indeed, this is quite important. When you do so, you will have accurate data for you or your accountant to:

  • Complete your business accounts for the company financial year, along with a company tax return.
  • Complete your personal tax return for the personal tax year with income details from your business, along with any other personal income details.

Conforming to the above will help you and your business stay on the right side of the various tax offices.

Online software and being well organised 

If you are using an online accounting digital service such as FreeAgent, that is complaint with Making Tax Digital, this will make your updating easier. A digital platform is effectively bookkeeping software and it will help streamline your business’ bookkeeping and accounting.

Besides showing key data such as your Balance Sheet and cash flow, book-keeping software make the general task of updating your business records with all of its financial transactions a whole lot easier, compared to using a spreadsheet type system. Therefore, digital software helps you to maintain business records more effectively in terms of your business’ financial information.

Making Tax Digital (MTD) is currently compulsory for maintaining VAT records and filing VAT returns. In addition, it will extend into other financial reporting areas too in the future. The near future plans include MTD for landlords and Self-Assessment is also on the horizon.

If you organise your company well from the outset, this is a good way to start. You should always aim to manage your accounts and small business bookkeeping effectively, throughout the financial year. Your contractor accountant can help and advise you here.

The types of records to keep

As part of looking after your company’s records, the types of information that you need to keep are not set out by HMRC. However, these will include:

  • invoices or remittance advice for your services or sales.
  • company credit card statements.
  • payroll information (payroll records) you have a PAYE scheme.

Keeping up with it  

When maintaining your records, it is a good idea to set up a process for your record-keeping and stick to this from day one.  When you are maintaining your business records, you can spend fifteen minutes a month or so organising things and complete any necessary updates. If you do this each month, it is a good way to keep on top of it. If you do let it slip, it will leave you with several months to catch up on later on all at once.

You could keep the actual small business bookkeeping on an Excel type spreadsheet. You can also keep them on a digital service such as FreeAgent.

Your invoices and receipts and mileage records can be kept either on a manual or electronic basis. You can also use a mixture of these storage methods.

If you use a spreadsheet, you should make sure that you save both the bookkeeping spreadsheet and the actual records in a safe place. It is also wise to make a spare backup.

Small business bookkeeping -moving online

As part of your record keeping, if you are not VAT registered, you can still use Excel spreadsheet type system.

Since Spring 2019, if you are VAT registered, you need to keep your records on a digital system, such as FreeAgent. There are other digital systems out there too but FreeAgent is very popular with contractors and small business.

FreeAgent and other online systems also help improve the way that business updates its books. These are a much more efficient way to keep up to date as they link directly to your company’s bank account.

You should also be able to update your records on the go, with a digital system. Most, if not all, have an app that you can download to your smartphone.

When you have your records on the cloud, this will also mean they are up to date with bank information at any one time. You can link your bank account to the software. As part of this you can see a snapshot of your company’s finances at any time, wherever you are.

How long do you have to keep business records

As a business, you need to keep your business accounts records for each of your accounting periods for a minimum of six years. Accounting periods usually cover a year therefore for the year to 30 June 2023, you would need to keep the records safe until July 2029.

The purpose of saving your accounting records for six years is due to the fact that you may have a VAT, PAYE, or Corporation Tax review by HMRC in the future. If you do undergo an HMRC review, they will need to see your records. Once the six years have gone by, you can destroy the records.

Final thoughts

When you are well-organised when you maintain business records, it will stand you in good stead for your contractor accountant. It will also assist for your own reasons, if you need to refer back to something in the future -if your records are well organised, it is easier to locate past transactions if a query arises. Finally, it is also important to have organised records in case HMRC ever do a review in the future.

Link to Contractor Advice UK group on

LinkedIn    https://www.linkedin.com/groups/4660081/

Published On: March 2nd, 2021 / Categories: First timer guide, Record Keeping /

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