Unless you are starting a business as an accountant or bookkeeper you are probably not looking forward to setting up your books. Unfortunately, there is no choice but for an existing business to maintain a full set of financial records. What is more, there are time limits for sending the information to HMRC, and the information must be accurate.
One benefit to doing your own books is that you will start to see trends in the finances, from incoming to outgoing, which will help you to understand where your business makes money and where most of it is spent. The downside of this is that it is a time consuming job and it will take you a few hours each week at minimum to maintain all the records.
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Keeping Proper Records
If you are not an accountant you will likely not know how to set up your books properly for the industry that you work in. Taking advice at the outset is the best way to ensure you go forward with the ability to meet compliance. Your accountant will be able to explain the different aspects that are important to your business and also help you to create your spreadsheets or put your accounting software in play. Regardless of the type of business, you will want to have a cash book, which details the incoming and outgoing payments. This should be kept up to date and after a few months, you will be able to see trends which you can use for forecasting as well as having a historical record of your transactions which will satisfy HMRC requirements.
Sales invoices also need to be kept in chronological order. If you are using an accounting package this will be done automatically but if you run a Word document you will have to do this manually. Keeping unpaid invoices at the front will help credit control. A purchase invoice file will also be needed to keep notes on invoices such as the cheque and cash notations. This will make things easier when it comes time to do the accounts. Be sure to get an invoice anytime you buy something and keep all receipts and invoices in chronological order as well.
The longer your business is in operation to more likelihood of a review by HMRC. With a professional accountant on your side and all of your records in order, you will not have to worry about its outcome, but this is a proactive measure that must be followed through with early on. Keep your business and personal banking separately to make doing the accounts easier with the added advantage of being able to avail of free banking on new commercial accounts for up to 2 years if you shop around for banks.
Be sure to check your bank statements every month, which will identify if any mistakes are made by the bank or if any fraud has happened. You will also begin to gain a thorough understanding of where your money is being spent by doing so. Keep a tight grip on spending and consider all purchases carefully from the beginning. This will help to be sure you don’t spend too much on any one aspect of the business.
Above everything, make time to do the bookkeeping regularly and don’t let it build up as it will always be more difficult if there is a pile of it. If you leave your bookkeeping until the evening you might be tired and make mistakes. If you have to do your bookkeeping outside of business hours because you are too busy working, you will need to set your alarm to get up early or start to work on the weekend to complete the task. By buying a good accounts software package you will find that the process can be made much easier than the traditional method and this will save you time. If you feel that you still do not have the time to commit to doing this right, you should hire a professional accountant and a bookkeeper to keep your records up to date on your behalf. This might be worth it in savings of time, and also by considering a cost-benefit analysis on your use of time. Perhaps it would take you a great deal of time because you really don’t like account work, whereas if you hired a professional you would have the peace of mind of knowing it was done right, and still have your time free to use as you need to.
The price of a good accountant is well worth the value that you will receive from their expert knowledge and application to your business. Talk to us about how we can help you with your accounting needs.