Every business has to keep a comprehensive record of its financial affairs. It is necessary to keep track for the financial management of the business. Your records will be used to prepare your accounts and tax returns and may be inspected by HMRC. Therefore, they must be accurate, full and clear.
Planning your approach to bookkeeping at the start is a far better idea than simply leaving it until the end of the first year. It means you won’t have to retrieve documents such as receipts or bank statements later and will minimise your stress further down the line. As well as meeting reporting and tax requirements, the records will give you a picture of the financial status of your business. You might be able to find and solve problems promptly.
To save on time and accountant’s fees, it makes sense to plan and agree your approach with your accountant as early in the year as you can.
Paper or spreadsheet based books
This can be a quick and simple approach for small businesses. Consult with your accountant on the layout of each page so they are able to assess your financial situation without needing to spend extra time re-analysing your figures.
Before opting for paper or excel records you should consider some downsides. As the business grows they very quickly become inefficient and unreliable.
A further constraint is that HMRC are expanding requirements for all but the smallest business to keep electronic records. The rules are known as MTD (Making Tax Digital). If, for example, you need to be VAT registered, paper records will NOT be acceptable.
Computerised cash books
Cashbooks record and analyse receipts and payments. They can also enable bank reconciliations and generate VAT returns. Some simple systems even meet HMRC’s MTD requirements. They may be easier to use than a full accounting system but do support some actions such as generating invoices.
There are many cashbook systems to choose from. The best I know of is VT, available free from: www.vtsoftware.co.uk/tranplus/download.htm
This is properly maintained freeware; it is not a trial or time limited version. The link above includes a comprehensive user guide suitable for novices and experienced users.
Until a few years ago the cost and complexity of accounting systems put them beyond the reach of small businesses. In an increasingly digital age, this has changed and there are now many practical solutions at affordable prices.
Most systems for small businesses are online (“Cloud” based). This of course means they can be used from anywhere with an internet connection. A less obvious but equally important advantage is the system will be kept up-to-date; changes to legislation imposed by HMRC will be included automatically.
There are many cloud based systems such as Xero, Freeagent and Kashflow. I have no hesitation in recommending Xero. It is well supported and carefully designed to meet the needs of small business owners who do not have accounting knowledge. It can be linked to bank accounts and to online trading platforms such as Amazon and Ebay. The time, effort and stress that Xero can save makes it extremely cost-effective for all but the smallest and simplest businesses.
Bookkeepers have the experience, time and procedures needed to input data in a way that is quick and efficient. While it will cost money, you will be able to rest assured that the data entry is correct, and you will not need to review and correct things. This will allow you to focus on what you do best; running your business.
Make sure you provide your accountant with bank statements, invoices, receipts and sales summaries for every transaction. These documents should be sorted, filed and labelled, to reduce the time spent by the bookkeeper, and thus the financial cost to you.
Here at Aston Black we can offer a full bookkeeping service; you simply scan or forward electronic copies of documents and we do the rest. Alternatively, if you want to provide paper based records or to have a bookkeeper working on your site, we can refer you to a qualified bookkeeper.