Are your books up to date? Fiona Thomas fills us in on her expert tips for taking the burden out of bookkeeping.
Keeping fair, accurate and timely accounts is a legal requirement for everyone in business, whether you’re a Sole Trader, a Limited Company or a PLC. To do this, you need to ensure you have good record-keeping processes in place. This should be a priority in the day-to-day operations of your business, but doesn’t have to feel like a burden.
The key to good record keeping starts with determining the priorities for your time. Is it better spent promoting your business, on delivering the product or service OR on processing your sales figures, expenses and overheads, as well as reconciling your bank and payment accounts such as Izettle and Stripe?
There are a few other questions to consider: Do you have assets and liabilities? Should you be VAT registered? And if so, do you know how to handle these in your accounts? In answering these questions, you can understand whether you have the time and expertise to undertake your record-keeping, or whether you need the support of a bookkeeper or accountant?
Whoever you decide is best suited to be responsible for keeping your accounting records up to date, here are some tips to set you on the right path…
1. Choose mainstream bookkeeping software
you should choose a mainstream accounting software that is supported by bookkeepers and accountants. Where possible, choose a software that integrates any sales distribution channels you may use and payroll. Xero is an excellent choice. It is user-friendly for the layman and is one of the industry favourites today.
2. Set up a dedicated bank account
Fundamental to all good record keeping for a business is a dedicated bank account. A key mistake made by businesses is using a personal account as their business account. This muddles personal expenditure and income with business expenditure and income and makes reconciliation of the accounts a much more complicated task than necessary.
Keep it simple. Open a current bank account dedicated to your business transactions and even consider a savings account dedicated to your business to help you ringfence funds for Corporation Tax, Personal Tax and VAT (as applicable to your business). If you ensure all transactions are made through your bank and card accounts with minimal use of cash you can ensure you have complete accounting records. Use of cash requires more discipline.
3. Keep track of your data
Once you have your bank account set up, you’re ready to trade. Whether you sell through an online store, your website, through word of mouth or other distribution channels will determine how you take payments. You may have to raise sales invoices, or have a POS system, or maybe you keep manual sales sheets. It’s important to understand the data you collect throughout the sales process to avoid duplication of effort and data, and ensure you have complete records. An online store can potentially link directly into your accounting software and can no doubt produce csv reports which can be imported. POS Systems can usually link directly to accounting software.
Whether you raise invoices or not, you need to keep a record of all expenses and overheads and these need to be evidenced by receipts or purchase invoices. In the case of insurance, you need to provide premium invoices and policy schedules. It’s the responsibility of the business owner to ensure that they can evidence all transactions that are put through the books to make up the accounts that are submitted to HMRC.
4. Keep tabs on all of your source documents daily
Another key mistake is to give the collation of source documents for sales, expenses and overheads a low priority in your day-to-day operations and to leave it to the last minute.
Even if you delegate processing your sales and expenses, it’s still your responsibility to provide the source documents (the documents that provide proof of transactions) to auditors. If source documents aren’t dealt with immediately or on a timely basis, you’re likely to have to undertake a last minute, time-consuming exercise to find the missing documents. If lost, this can result in understated sales and not being able to claim back expenses due to a lack of evidence. As well as incomplete and inaccurate records.
5. Use an end-of-month checklist
To ensure that you’re on track and your record keeping is fair, accurate and timely, use an end of month and end of year checklist. These lists ensure that the key accounting documents speak to each other and balance. A bookkeeper or Accountant can help you with these. These check lists ensure that you meet your legal requirements in terms of personal and/or corporation tax, PAYE, National Insurance and VAT if applicable. There are fines for missing deadlines and for incomplete or inaccurate records.
Good record keeping is simple but requires discipline. A bookkeeper or an accountant can help you understand your record-keeping requirements and help you put in place efficient processes, whether it is you or someone else who may be responsible for these.
They can also ensure that there aren’t any peculiarities in your operations that require special accounting treatment, and ensure that you are being as tax-efficient as possible whilst meeting your legal requirements. If you’re looking for support, get in touch.