As a small business, it is easy to get carried away with the day to day running of your business. This could mean you take your eye off the paperwork. Here we take a look at why keeping records is so important. After all, if you are not organised, lose paperwork or do not keep accurate records you will end up spending longer sorting it out. And, you could find yourself in trouble with HMRC.
Whether you are a sole trader, a small limited company with just yourself as an employee or you have staff on payroll, the fundamentals of good record-keeping are the same.
What Records Should I Keep?
If you buy something or pay for a service, in full or part for your business you will be entitled to offset the cost or relevant business use proportion to reduce your profit. You must keep receipts safe to support your claim. Entering them into an accounting package or spreadsheet and storing them carefully is critical. You will be required to keep them for a minimum of seven years to support your tax returns.
Any product, service or equipment sales amounts must be recorded. You will need to keep a clear record of money received, whatever the source. Again, entering details onto a suitable accounting package or spreadsheet will help you keep track. You need to be able to distinguish between invoices paid and those outstanding. This is important for tax returns and ensures you have clear details of outstanding debts.
Motoring expenses records
Whether you use your private vehicle or have a dedicated work vehicle, keeping records of mileage and expenses is necessary. Depending on your business size and structure and how you claim for motoring costs, you will need to keep records showing claimable journeys made, mileage travelled and additional motoring costs. You will either need details for an HMRC approved rate claim or information to support an actual vehicle running cost claim.
Many small businesses qualify for 100% claim deductions for continuing use items through the capital allowances rules. However, some may be required to claim through their tax return any amounts depreciated over their expected lifespan. You can read more on business expenses to ensure you treat your capital expenses correctly. Again, you must keep full and sufficient records.
Ensure that any wages you pay to your workforce are recorded clearly. You must keep full records of any deductions made.
If your business income requires you to be VAT registered or you have chosen to be, you will need to file VAT returns periodically. Keeping clear easy to records is vitally important to meet your VAT return deadlines with correct figures.
In addition to keeping clear and tidy accounting records, it is a good idea to keep other business information. Things to consider recording include:
- Ongoing income/expenditure figures to see how profitable you are.
- Asset and liability information.
- Stock levels and asset values.
- Marketing and growth plans and progress.
- Overview of expenses by category.
- Current debts
- Analyse of incomer by distribution channel.
Be organised and know your small business tax tips, so you don’t forget or lose anything important. Then, you can be sure that you won’t have problems when asked to provide your records.