If you have your own business, no matter the size, bookkeeping is a legal requirement of HM Revenue and Customs.
Basic Records to Keep
Your basic records will normally include:
- a record of all your sales, with copies of any invoices you have issued
- a record of all your business purchases and expenses
- invoices for all your business purchases and expenses
- details of any amounts you personally pay or take from the business
- copies of business bank statements
You or your accountant will use these records to create a profit and loss account, which shows the sales revenue you’ve received and expenses you’ve paid, and what profit/loss you’ve actually made. Your tax liability will be based on this.
Other records you must keep
Every business is different and there are many specific types of detailed records that may need to be kept. Some examples of records you must keep include:
- payment book
- petty cash book
- order notes and invoices
- copy sales invoices
- details of any other business income received
- details of any private money brought into the business
- box rolls or other form of electronic sales record
- details of any other income
- any cash drawn from the till to pay for small business expenses
- receipts and invoices for purchases and expenses
- a record of stock on hand at the end of the year
- all bank and mortgage company statements, savings books, check stubs and pay stubs that include business transaction details
If you do not keep accurate and complete records, you may end up paying more tax than you should due due to lack of evidence of tax deductible expenses or/and inaccurate sales records, causing HM Revenue and Customs to assess your expected sales. If you pay an accountant to prepare your accounts, they will charge you according to the time it takes. If your records are more accurate, this will reduce the time it takes and therefore reduce the amount they charge.
The reasons above are enough to make sure you keep good books and records, but the most important reason is to make sure you’re in control of your business and able to assess its profitability and cash flow situation, so you’ll make sure you’re aware of any potential problems as soon as possible. as possible and can make business decisions with all the information available at hand.