Unfortunately record keeping isn't the most fascinating area of running your own business, but it's a very important one nonetheless. You cannot underestimate the negative effects of poor record keeping on your business including  paying excess tax, something that could potentially spell disaster for your business. At a 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, but 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.

Well if recent research is anything to go by there's a good chance your records are inadequate. In fact, a pilot programme has found that just under half of all SMEs had problems with their record keeping. The bad news is that HMRC is extending its business record checks with a planned 12,000 checks by the end of the current financial year. The good news? Well, if you can call it good news, the penalty will initally only be given in extreme cases.

"Good record keeping helps businesses pay the right amount of tax at the right time, thereby potentially avoiding interest and penalties," says Richard Summersgill, HMRC's director of local compliance.