If you’re looking for advice on simple record-keeping for small business, look no further.
In this post we highlight the essential documents you must keep track of for your books.
What is the importance of record keeping in a business
For many new entrepreneurs, the field of finance can be daunting and unfamiliar.
With the day-to-day management of a start-up taking centre stage, the accountancy side of the business can often be neglected.
Keeping track of your business finances is crucial for the success of your startup. By staying up-to-date with it, you can make informed decisions that will positively impact the direction of your business.
However, managing the accounts is one of the biggest start-up hurdles in this delicate new growth period. – Especially if you’re accustomed to it.
Especially with 60% of small business owners admitting to not knowing what they’re doing with their accounts.
Additionally, accurate business records are legally required and must be kept for several years in case of HMRC inspection. Inadequate records could result in fines of up to £3,000.
Benefits of booking on your business:
Careful management of your accounts will benefit your small business in the following ways:
- Maintaining orderly records streamlines the filing of your annual Self Assessment tax return with HMRC
- You’ll make informed decisions on business ventures
- Predicting and forecasting business trends
- You can more easily secure investments or loans
- Identifying your budgets for products or services for profitability
- Better budgeting and planning invoices (receivables)
- Tracking expenses
- Avoiding costly mistakes!
What records do you need to keep for a small business?
As a small business owner, you must keep records of various financial documents.
These records provide evidence of your business transactions and help you accurately report your income and expenses.
It’s essential to keep these records organised and easily accessible for future reference or in case of an audit.
The accounting records you must keep include the following:
Keep a record of all your income into the business either in electronic or paper form, This includes:
- Bank statements
- Paying- in slips
When creating an invoice, it is important to follow HMRC’s regulations.
Each invoice should contain a distinct number, the date, and the names and addresses of your company and the customer.
Additionally, the invoice must describe the goods or services being charged, the date they were provided, the amount being charged, and the total amount owed.
Record all your business expenses, either in paper receipts or digital copies.
- All goods or services bought and in receipt forms
- Details of assets owned by the company
Other business records
- Employee PAYE records
- Money received from grants and payments, including coronavirus (COVID-19) support schemes
To correctly complete the personal portions of your tax return, it is vital to maintain records of any income you have received outside of your business. Your records could consist of various items based on your circumstances, such as:
- You will need to gather any documents related to your employment, such as P45s, P60s, P11Ds, and payslips if you worked full-time or part-time in addition to any self-employment you had during the tax year
- Any interest in your personal bank and building society statements
- UK company dividends (original copies)
- Money received from benefits
Keeping these financial records helps to prepare and file your annual accounts and Company Tax Returns.
While hiring an accountant is a simple option, many small business owners choose to do their accounts. – Especially in the early stages when finances are tight.
If you want to do your accounts, you’re not alone. A surprising 70% of small businesses don’t employ the services of an accountant.
Below we share some essential bookkeeping tips for keeping an accurate record of your accounts.
- Keep all bookkeeping accounts from the start
- Create a business account
- Keep your records organised
- Save aside a budget for your taxes
- Track all of your expenses
- Maintain control of your accounts receivable
- Set aside dedicated time each week or month to perform accounting tasks.
- Set tax deadline reminders
- Use accountancy software
Best accounting software for self-employed
As a small business owner, using accounting software is beneficial.
It is a highly efficient tool that automates numerous accounting tasks, makes financial reporting more straightforward, and provides real-time updates on the financial status of your business.
Here are some key benefits of using accounting software:
Using accounting software can significantly streamline your financial processes, freeing up time and reducing the likelihood of mistakes. By automating repetitive tasks like data entry and calculations, you can focus on more critical aspects of your business.
Accurate financial reporting
Accounting software lets you easily create precise and polished financial statements, including invoices, profit and loss, balance sheets, and cash flow statements.
With accounting software, you can effortlessly generate and send professional invoices to your customers, keep track of payments, and efficiently manage accounts receivable.
Easy expense tracking
When you connect your bank accounts and credit cards to your accounting software, you can effortlessly keep track of and classify your expenses. This makes the task of recording and reconciling transactions much more manageable.
Frequently Asked Questions
Can I do my own bookkeeping?
Yes, you can do bookkeeping yourself. Bookkeeping involves the recording, classifying, and organising of financial transactions.
It is the foundation of good accounting practices. By keeping your books, you have a clear understanding of the financial health of your business and can make informed decisions.
However, it is essential to note that bookkeeping requires attention to detail and consistency. Consider using accounting software to streamline the process and reduce the chances of errors.
How long do self-employed need to keep records?
To comply with HMRC regulations, keep your records for at least 5 years after the 31st January deadline of the relevant tax year.
How to develop a record keeping system for a small business?
To create a record keeping system to use for your small business, create a routine around:
- Use a digital document management system
- Save all your receipts
- Save all invoices
- Implement payroll and accounting software
- Separate and log your business and personal finances
- Conduct regular security checks while backing up your records
- Keep documentation for a minimum of 5 years
The bottom line- Simple record keeping for small business
Maintaining good financial records is crucial to the success of any business, but it can be challenging, especially if you need an accounting background. However, by following some basic financial record-keeping practices, you can run your business smoothly. Gathering all the necessary information can be the trickiest part of financial record keeping.
You can easily manage your own bookkeeping by scheduling regular accounting tasks, tracking your income and expenditure, and using accountancy software.
A system like DocFlite can help streamline your document processes. Find out more about DocFlite here.