maintain business records

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Introduction 

Knowing how to organise your small business records is vital when running your own UK contractor company. As part of a contractor’s bookkeeping and accounting, a person should know how to complete and keep their company or sole trader records. Moreover, they should know how to maintain business records (UK) for their UK contracting company. Indeed, keeping business records includes basic bookkeeping via a business record keeping system. It also includes maintaining the financial records for your UK contracting business. It’s even more important for limited company directors to keep accurate records as part of their VAT record keeping. A contractor bookkeeping spreadsheet (UK) was the norm in years gone by. However, many now use limited company contractor bookkeeping software via a digital online system.

As mentioned above, when running your own UK contractor limited company, you may previously have used a simple bookkeeping for contractors’ solution. This could’ve been an Excel VAT bookkeeping spreadsheet for small businesses. A small business accounting spreadsheet will usually suffice when your business is a one-person venture, and you’re not VAT-registered. However, in most cases, the simple bookkeeping spreadsheet for UK contracting professionals is now a thing of the past. This is because most now keep their records online, especially if they’re VAT-registered. However, those who prefer it and aren’t VAT registered can still use a contractor spreadsheet for small business accounting to record financial transactions.

This guide will research record-keeping requirements for UK contractors and small businesses. We’ll also explore the types of record keeping in business, how to maintain records for your company and the types of business records. Indeed, maintaining accounting records is vital for any business. Therefore, it’s essential to get this right from the outset.

Initial thoughts

How do you do basic record-keeping for business?

What’s the best way to keep business records when you’re record-keeping for a small business? One of the best bookkeeping tips is to organise yourself with well-kept bookkeeping. Moreover, a good starting point is to ensure you regularly keep up with the updates. When you maintain business records as a contractor or business owner, besides maintaining financial records, there may be other company records to maintain. Indeed, these other records may include:

  • Health and safety.
  • Employee records -this includes personal details such as national insurance numbers.
  • GDPR requirements, etc.

This guide will focus on business record keeping tips. Indeed, it will cover how to keep bookkeeping records for a small business, including financial record keeping. Moreover, it’s an essential read for someone starting a business and keeping records for the first time.

Know from the outset which records to keep for your business

Suppose you’re a sole trader or a contractor starting up your own company for the first time. In this case, knowing from the outset about company record keeping is essential. Indeed, this includes a contractor’s bookkeeping and which records one should retain. Further, it includes how to update and look after your company records on an ongoing basis. As part of this, you’ll reconcile transactions in your bookkeeping system to the company bank account.

Maintain business records (UK) 

How do we keep accounting records for a small business?

Maintaining business records and organising these well will stand you in good stead. When we consider how to maintain records, keeping up with this and ensuring the records are accurate will give you an excellent overall view of your company’s financial position. Indeed, when you organise your records well and keep business accounts, if they are accurate and up to date, you can view them at any time, should the need arise.

It should be every contractor and small company owner’s aim to maintain accounts record keeping to a high standard. Indeed, keeping business records up to date is quite important. When limited company directors do so as the business grows, they’ll have accurate data for their accountant to:

  • Complete your company’s business accounts and a company tax return for the financial year. Once complete, you can file the financial statements and company tax return with Companies House and HMRC.
  • Complete your tax return for the personal tax year with income details from your company and any other personal income details. Once complete, you can file your tax return with HMRC.

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

Use online contractor accounting software (UK)

If you use an online accounting digital service, such as FreeAgent, that’s compliant with Making Tax Digital, this will make your updating easier. This is compared to using a contractor bookkeeping spreadsheet, which was the usual way in the past. A digital platform is, in effect, bookkeeping software online, and it’s an excellent way to maintain business records. Indeed, using a digital service will help streamline your business’ bookkeeping and accounting. Moreover, you can use the FreeAgent invoicing system, which makes sending invoices and reminders for these much easier. There are many other plus points, such as logging expenses and filing payroll, amongst other features of digital software.

Critical data such as your balance sheet and cash flow are available, and online bookkeeping software makes updating your company’s records with its financial transactions much easier than using a small business spreadsheet (UK) type system. Therefore, digital software helps you with your bookkeeping and financial records more effectively regarding your company’s financial information.

Making Tax Digital (MTD) is now compulsory for VAT record keeping and filing VAT returns. In addition, it will extend into other financial reporting areas in the future. Plans include MTD for landlords, and Self Assessment is on the horizon, too.

Organising your company well from the outset is an excellent way to start. It’ll help if you always aim to manage your accounts and small business bookkeeping (UK) effectively throughout the financial year. Your contractor accountant can help and advise you regarding accounting and record-keeping for small businesses.

How do you keep your bookkeeping records in Excel? 

If you’re not VAT registered, you may prefer to use a contractor or sole trader bookkeeping spreadsheet (UK) or even a business record keeping book. If you use a small business bookkeeping spreadsheet, you may ask how you maintain bookkeeping in Excel. The answer here is that you could set up an accounting spreadsheet, or your accountant may have a template small business or contractor bookkeeping spreadsheet you can use. Whichever template you use, you should ensure all the formulas are correct and include the relevant cells. Alternatively, if you use a record-keeping book for business, you should keep this up to date by updating it regularly. 

Maintain business records & what types of business records to keep?

As part of keeping accounts for small businesses, what records should you keep when you maintain records as a UK contractor? This HMRC detailed guide details the types of accounting records small businesses need to keep. To clarify, these financial and accounting records for contractors and small businesses include the following:

  • Cash books if you keep any offline records and use this to record transactions. Before online accounting, most businesses would keep a cash book to record their transactions.
  • Invoices or remittance advice for your services or sales.
  • Company credit card statements.
  • Payroll information (payroll records) if you run a PAYE scheme for wages.

Usually, business owners must complete an annual personal tax return. Likewise, they must keep and retain records of any details for their tax return for income tax purposes.

Other thoughts 

Maintain business records & how long to keep financial records for a business (UK)? 

You should know how long to keep your company and business records. Therefore, let’s consider how long to keep tax records (UK limited company) for your business.

For a UK contractor or small company owner, the rule for keeping business records (UK) for a company is six years. Therefore, you should keep accounting records for at least six years for each accounting period. Accounting periods usually cover a year; therefore, for the year ending 30 June 2024, you should keep the records safe until July 2030.

The purpose of saving your accounting records for six years is that you may have a VAT, PAYE, or Corporation Tax review by HMRC in the future. They’ll have a requirement to see your records if you undergo an HMRC review. Once the six years have gone by, you can destroy the records. 

Maintain business records & how to keep up with this day to day 

Setting up a process is good when you maintain your bookkeeping records (small business). This process is your company or sole trader’s bookkeeping and record updating, and you should stay on top of this from day one. While maintaining and keeping business records, you can spend fifteen minutes monthly to organise and complete any necessary updates. Indeed, completing your business bookkeeping processes each month is an excellent way to keep on top of it. However, letting it slip will leave you several months to catch up on everything at once.

You could keep the small business bookkeeping on an Excel-type contractor bookkeeping spreadsheet. You can keep them on a digital service such as FreeAgent, especially if you should be maintaining VAT record keeping. You can operate on a cash or invoice basis when you’re VAT-registered. Most contractors and small businesses operate on a cash basis as they’re under the threshold for invoice basis. When you’re operating on a cash basis, you report VAT when you receive payments or pay suppliers. On the other hand, if you operate on an invoice basis, you declare VAT when you issue invoices and when your suppliers bill you.

Invoices, receipts, and mileage records should be kept manually or electronically. You can also combine these storage methods.

Using a limited company spreadsheet, you must save the basic bookkeeping spreadsheet and the actual records in a safe place. It is also wise to make a spare backup of the small business accounts spreadsheet.

Bookkeeping records -small business & move to online software 

You can still use a contractor bookkeeping spreadsheet on Excel or another system if you’re not VAT registered. You can use a basic accounts spreadsheet to maintain business records for your company or sole trader business. However, since Spring 2019, if you’re VAT registered, you should maintain VAT record keeping on a digital system. When you’re VAT registered, you’ll use an accounting method for VAT: invoice or cash basis. Most contractors and small businesses operate on a cash basis; therefore, a digital system will let you select the VAT method. There are many other digital systems besides FreeAgent; however, this is very popular with limited company contractors and small businesses.

FreeAgent and other online systems help improve how businesses update their books. This is a much more efficient way to maintain your VAT record keeping than the business accounts spreadsheet option. It’s because they help keep the business up to date as they link directly to your company’s bank account. Most digital systems can keep accurate VAT records. If you’re operating on an invoice basis, the system should be able to handle reporting VAT based on invoices. As part of this, it should be able to keep track of accounts receivable and accounts payable.

With a digital system, you can usually update and maintain business records on the go. Most have an app that you can download to your smartphone. When you have your records on the cloud, they’re up to date with the latest bank information at any time. You can link your bank account to the accounting record-keeping software. As part of keeping financial records this way, you can see a snapshot of your company’s finances at any time, wherever you are.

Final thoughts 

Most UK contractors nowadays use a digital platform such as FreeAgent to maintain a financial record-keeping system. It’s generally the best way to keep records for small businesses. When we consider bookkeeping for contractors, they’ll update and maintain business records for their UK contracting company via FreeAgent on an ongoing basis. However, some who do not register for VAT can still use a contractor bookkeeping spreadsheet if they prefer.

When you’re well-organised and keep good company records, it’ll stand you in good stead for your contractor accountant. Indeed, if you stay on top of this, it’ll assist you if you must refer to something in your records in the future. If your records are well-kept, it’s easier to locate past transactions if a query arises in the future. Finally, it’s essential to have accurate and well-kept records in case HMRC ever does a review in the future.

Link to Contractor Advice UK group on

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Published On: April 6th, 2024 / Categories: First timer guide, Record Keeping /

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