Keeping Good Records
We’ve seen it all; carrier bags of screwed up receipts, hand-written cash books as well as highly sophisticated and complex schedules even we can’t understand. You don’t need anything too extensive, but it is important to have a system in place to ensure your recordkeeping is up to date, clear and accurate, and here we highlight our key reasons to keep good records, followed by our simple guide to how to go about it.
Why is it important to keep good records?
Minimise your risk from an HMRC enquiry and keep the tax man happy. With HMRC increasing their efforts all the time to claw back lost taxes, bad or incorrect records will enable them to question your business records and you could end up incurring additional tax and penalties if there are errors or incorrect claims being made. You must keep your records for at least six years, and HMRC can request to see your records for earlier years if they have reason to believe your records are incorrect. It’s also your obligation as a business owner.
Keep an eye of your finances. Having good records will allow you to have a clear picture of where your current financial position is, allowing you to see who owes you money and who you owe money to, which will help you plan your cash flow and future growth. Better recordkeeping allows you to put in place solid financial planning and keep up to date budgets and forecasts, so you can plan your future growth and be ready for any potential investment opportunities.
Be prepared for your tax bills. If you keep up to date records, you can easily prepare for any upcoming and future tax liabilities, such as VAT, corporation tax and income tax, to ensure you have enough cash ready. No one likes paying a tax bill but at least you’ll have an idea of what is coming and won’t have an unpleasant surprise.
Stay ahead of the game. Keeping your records up to date means that your financial advisor or mortgage broker will be able to help you plan for a mortgage or get other financial planning. You’ll know what you have spare and what you can and can’t afford. You accountant can prepare your year-end accounts soon after the year-end so you can stay on top of things
Claim the tax relief. You’re less likely to lose your receipts if you keep on top of them as you go, and then you won’t forget to include those costs when doing your tax return.
Stay quids in. The better your records, the less likely your accountant will need to charge you a premium for sorting through bad records.
Here are our tops tips on how to keep your records
Schedule the time monthly or quarterly to dedicate to your recordkeeping. Make it part of your routine. Whether you keep your records yourself or use a bookkeeper, keeping to a schedule will keep you on track.
Make sure that you have a system that works for you and you can follow, but can also be understood by the people that you need to help you financially, such as your accountants. If you are outsourcing this, make sure you understand the software and system used so it is beneficial for you.
Use a cloud based accounting software, such as QuickBooks or Xero. They can really help streamline an efficient process for your bookkeeping, and integrate with your bank account so you can reconcile your payments and ensure there are no anomalies. In addition there are many apps that can help with your receipt management meaning you can have paperless recordkeeping. You won’t need to print digital records, and using something like ReceiptBank will enable you to keep all your paper and digital receipts in one place. With Making Tax Digital (MTD) coming in to force this April, your business will need digital records to submit your tax returns if you are registered for VAT.
Attend training on your software so you know how to best use it to suit your business and ask questions so that you make sure it works for you and you use it correctly. Ask us about our online and in-house training sessions if you are using Quickbooks.
If you don’t use a software like ReceiptBank, reference your receipts and invoices so you can easily trace and find anything, whether for a HMRC enquiry, reordering or querying a payment.
Don’t overthink it, just do it, make it part of your day to day routine and outsource it if you need to. Get in touch if you would like further support.
FUSE is an independent Chartered Certified firm of accountants and tax advisors based in Highgate Village, North London. We provide a dynamic range of services to clients working in property, media, entertainment and professional services. Our clients vary in size from self employed sole traders, small enterprises and medium size businesses. We believe that comprehensive financial planning and sound business financial advice are the keys to growth and profitability.
