Keeping on top of your business accounting is an essential part of being in business. It might also help boost your profits. It can certainly let you know how the business is doing, and whether or not now would be a good time to expand, or if you should wait until six months down the line, hopefully when profits pick up.
It’s not for these reasons alone, though, that you should have excellent accounts records, but also for the fact that it is actually a legal requirement that businesses maintain good accounting records. That way, Her Majesty’s Revenue & Customs (HMRC) are more reassured that you, as a business owner, are paying the correct amount of tax – and that you will pay it on time, since the better your accounting records are, the more likely you are to do them, and the less time it will take you. The alternative is to have a huge pile containing a year’s worth of receipts and invoices – which could take you a couple of days to wade through and record. And just think how depressing that would feel – knowing that one day, you’d have to sit down and face it all…
Failing to keep accurate business records could result in a hefty fine or even – in the worst-case scenario – a prison sentence for attempted tax evasion! Incidentally, if you are subject to a HMRC inspection, then auditors will want to see your books for the past six years.
Meanwhile, if you’re a fan of setting yourself targets to motivate yourself and/or your employees, then good record keeping will allow you to look back on previous months or years and compare your company’s current activity levels.
Tips to ensure you keep on top of your records
Use an app.
This will remind you to regularly update your records and will store it in an easy-to-access format in case you need to check invoices etc. There are a whole number of apps you can use for accounting purposes – many of which are free. Some of the more popular accounting apps include Wave, FreeAgent and Zoho (which are best for freelancers and small businesses) or, for larger companies, apps which include stock control and payroll functions include the likes of Adminsoft Accounts and FreshBooks.
Another benefit of using an app is that it’s easy to record all your transactions in real time, meaning you’re less likely to forget them. It also lets you keep track of your business finances on an ongoing month by month basis.
Remember to back-up.
Yes, using an app to record your year’s accounts is a great idea – until your iPad gets nicked or your computer goes on the blink, and you lose it all! Use a USB stick to back up easily – just make sure you remember where you’ve put it.
Separate personal and business accounts.
Have an account that you use for business income and expenses only. That way, there’ll be no confusion over whether an entry was for work or leisure purposes.