Maintaining your business records

Introduction

A key component of running any type of business, including when you run your own company, is maintaining your business records.
If you are 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 these. You also need to know how long to keep your records for.
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’s aim to follow the above. Indeed, this is quite important. When you do so, you can stay on the right side of the various tax offices. 
 

Online software and being organised     

If you are using an online accounting software system such as Freeagent that is complaint with Making Tax Digital this will make your updating easier.
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 bookkeeping effectively throughout the financial year. Your contractor accountant can help and advise you here.

Record keeping   

The types of records     

When maintaining your business records, the types of records that you need to keep are not set out by HMRC. However, these will include bank statements for the company bank account. This will also include invoices or remittance advice, and invoices or receipts for all business expenses. It will also include business mileage records if you use your private car for business purposes. Besides, you should also retain a) VAT info if you are VAT registered and b) payroll info you have a PAYE scheme.

Keep up with your record keeping     

When maintaining your business 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 can keep the actual bookkeeping on an Excel type spreadsheet. You can also keep them on a digital system 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.

Online record keeping     

Since Spring 2019, if you are VAT registered, you need to keep your records on a digital system like FreeAgent.
When maintaining your business records, you can still use Excel spreadsheet type systems at present if you are not VAT registered. You can also still use a spreadsheet if you are VAT registered, but you have not yet reached the VAT turnover threshold (£85,000).
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 can be 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 info at any 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 keep your records for     

As a business, you also need to keep your business accounts records for a minimum of six years. You will need to do this is in case you 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

I hope this article was a useful read for you. The chap in the picture looks much more happy than he does when he learns how long he should store his records for! When you keep well-organised records for your business, it will stand you in good stead for your contractor accountant. It is also good to do this in case of HMRC ever do a review.
Link to Contractor Advice UK group on LinkedIn    https://www.linkedin.com/groups/4660081/

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