Bookkeeping Tips for Small Businesses

Businessperson Calculating Tax

If you own your own business or are considering such a move, keeping accurate records not only benefits you for tax compliance, but it could also benefit your business.

Keeping accurate records may:

  • Reduce your accountancy fees
  • make filling in your tax return more straightforward
  • help you with budgeting and cashflow
  • help your business grow with the help of a business loan
  • help ensure you receive the correct Tax Credits

What you need to record:
Records should show all the money coming in and going out of your business, whether it’s cash, cheque or credit card transactions. It’s important to keep your business records entirely separate from your personal records, so it’s recommended that you set up a separate business bank account.

For money coming in, the records you should keep include:

  • payslips
  • invoices
  • till rolls
  • bank statements

For money going out, keep a record of all:

  • receipts
  • purchase invoices
  • cheque stubs
  • motoring expenses
  • credit card statements

Cash books:
All small businesses rely on cash books to help keep track of their business income and outgoings. Cash books can either be paper-based or take the form of computer software such as Excel, Sage, Xero etc. Your accountant will be able to advise you on the most appropriate type of cash book for your specific business.

If you decide to keep your records on the computer, you’ll need to keep a copy of all relevant documents and be able to provide these to HMRC if necessary, especially P45’s, P60’s and any paperwork showing tax has been deducted.

  • Use a ‘petty cash book’ to record all minor business-related cash transactions, and write a short description of each one.
  • Use a ‘cash book’ to record transactions made through your bank account as well as any cash transactions. A cash book will have columns for income and expenses and a separate column for miscellaneous. You may find it helpful to use the same expenses headings as those used on HMRC’s tax return form. You should also include a “drawings” column for any money taken out of the business for personal use.

VAT:
If your turnover of VAT taxable goods or services exceeds the VAT threshold (currently £83,000) you must register for VAT and keep the following records:

  • VAT account: This is a record of VAT charged on sales and VAT paid on purchases, noted under the headings VAT payable and VAT deductible. The VAT account aligns your business records with your VAT return.
  • VAT invoices: These show the VAT you’ve charged and the VAT that has been charged to you.

If you feel like this is too much, or your time would be more valuable spent elsewhere, your accountant may offer a bookkeeping service that deals with this for you. Here at Green & Co our staff are trained on a number of different bookkeeping packages including Sage and Xero. If you would like to speak to one of team regarding this service, please contact us on 01633 871122.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

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