Keeping clear and accurate records is essential.

Unfortunately not the most fascinating area of running your own business but a very important one nonetheless. You cannot underestimate the negative effects of poor record-keeping on your business including disorganisation and paying excess tax. At minimum you have a legal requirement for everyone who pays tax to keep the records they need to fill in a tax return, for VAT registered businesses there are more specific requirements.

Simply put, though it can be a challenge and frustrating at times, it just makes good business sense to keep well organised and accurate records. If you can get this right in the early stages by setting up a system and sticking to it you'll find the process is a lot simpler to keep up-to-date.

 

The advantages of good record-keeping speak for themselves:

You avoid paying too much tax and filling in your tax return becomes easier and quicker.

You avoid interest and penalties by making it easier to pay the right tax at the right time.

It gives you the information you need to manage your business and help it grow.

It makes it easier to get a loan.

It helps you budget for tax payments.

It helps the Inland Revenue to check your tax position accurately

You could reduce your accountant's fees (if you use one).

A well-organised system of information saves time.

It may support your claims to some reliefs or capital allowances.

It enables you to keep track of your employees progress and skills.

You can keep track of you clients/customers.

You can use information to predict sales levels and plan for quiet periods.

The main questions you should be asking yourself at this point are: what records should I keep and how should I store them?

 

The first things to remember are:

Set up a system that is right for you – We are all individuals and work better when we do things our way, some people prefer paper copies of everything whereas other will prefer a mostly digital system. As a rule you want to make your system geared to your business and simple to use; if you employ someone to keep records at a later date will they be able to pick your system up?

Keep records up to date throughout the year – Keeping a proportion of your records is almost as bad as not keeping any at all. Regularly updating your records makes your job much easier.

Keep records for as long as required – Records have minimum time periods you must keep them for, for example VAT records must be kept for 6 years or 5 from the latest date for filing your self-assessment return. Keeping up to date with the latest rules of the Data Protection Act will let you know the time-scales you need to adhere to.

Keep personal records separate – Never mix up business and personal records, this will cause you all kinds of problems when it comes to reporting for tax purposes.

 

 

 

 

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