Top tips for improving your record keeping
The instant your company begins trading, you are supposed to have learnt ways to be a professional juggler. Between landing huge sales and promoting your products, there are possibilities that you are going to forget to post the odd invoice or maintain updated invoices with details. Nevertheless, should you let several items slip under the carpet; you are likely to get your company in trouble. And this is the reason why you would need to think hard about record keeping techniques.
Fortunately, there are lots of techniques that you can put into practice to make record-keeping a rather fast and easy exercise. Listed below are three among the several requirements to assist you in getting started:
Understand the law
If you cannot create specific constitutional records, you may end up paying a £3,000 fine.
Few records may be worth keeping as they give insights into the techniques wherein your business is functioning; conversely, there are several other records that your company will be officially required to record and also report to the HMRC routinely.
Consequently, wherever relevant, you are officially required to update and keep up adequate records of the following:
â€¢ Your company`s register of members, stakeholders or guarantors;
â€¢ Your company`s record of directors with their regular home addresses;
â€¢ Your company`s record of secretaries;
â€¢ All service contracts of directors;
â€¢ A register of penalty charges and instruments that brought about the charges;
â€¢ Minutes of every shareholders and shareholders` company board meetings;
â€¢ Copies of every resolutions and conclusions that are made at these meetings;
â€¢ A record of all directors` insurances;
â€¢ A record of the company shares` sales
Additional records you need to keep have to do mainly with your company`s effectiveness â€“ which you need to report to HMRC in your yearly tax return. To realise this correctly, you need to really know what amount of cash is coming in and out of your company, and the ideal place to discover the movement of these funds will be by way of company invoices.
Invoices are utilised to track your income and consequently, they are necessary in estimating your financial well-being. When operating a business, it is an authorised necessity to be certain that you are keeping every invoice for at least six years. Similarly, company directors and sole traders should hold on to their invoice records for a minimum of five years and ten (10) months. Maybe you are in a partnership or self-employed? These records must be kept for at least five years.
Although that may seem to be a long time to keep track of paperwork, in as much as you stick to a set of organisational settings, it is very easy to guarantee your invoices are satisfactorily handled. The secret relies on making use of a no-nonsense, sequential filing system. It is essential that you accurately number and date each invoice and likewise keep them in two different files â€“ one for invoices not yet paid and the other for paid invoices. When you pay an incoming invoice, record the date and method of payment and move it into the proper file. Receipts must be handled in a similar fashion.
When in doubt, get in touch with HMRC and seek advice. Besides, if you are unable to produce certain constitutional records, you could end up paying a fine of £3,000.
You could even be penalised more should the records of your company show inaccuracies. Concealed and deliberate inaccuracies may end up costing you a penalty loss of up to 100% of the possible tax revenues through your non-disclosure.
Get the apps
HMRC creates a directory of safe and reasonable record-keeping apps, as well as simpler income tax apps.
Nowadays, apps are available for almost everything â€“ including company record-keeping. The majority of these apps can be downloaded free and some are easier to navigate than others. As you are technically not expected to keep a hard copy of receipts or invoices, you are perfectly advised to go paperless.
In fact, doing this might even assist in reducing some of your printing and storage costs. To assist you get started; below are five among the most easy-to-use business record-keeping apps that are currently on the market:
MyBizTracker: The creators of QuickBooks specifically developed MyBizTracker so as to provide small business owners with a fast, on-the-go snapshot view of their corporate financials.
This app permits you to record income and expenses in real time and likewise also lets you snap photos of your receipts so that you have got multiple records of every trade. MyBizTracker costs nothing to download for every Apple gadgets.
FreeAgent: another record keeping apps that boosts the same photo features just like MyBizTracker is the FreeAgent. However, FreeAgent is unique in that it is able to calculate a fairly accurate snapshot of your company`s tax liability at any given moment. FreeAgent is free to download for all Apple devices.
Sage Record Keeper: Sage Record Keeper, created by Sage is one of the global most popular suppliers of enterprise resource planning. It provides business owners with an absolute accounting solution for daily use. The app has a number of advanced features and one among the most desirable aspects of Record Keeper is its ability to process Construction Industry Scheme reductions.
Forbes Receipt Keeper: If you are an Android user, Forbes Pcs offer a sterling accounting product in its Forbes Invoice Keeper app. The Forbes Receipt Keeper have several of the same functions as the other applications listed; having said that, it enjoys a collaboration with the cloud service Dropbox that enables you to instantly back up every of your accounts.
ZipZipBooks: ZipZipBooks is an Android app developed specifically for businesses operating in the construction or property sectors. That is because ZipZipBooks specialises in filing Construction Industry Scheme receipts that are not appropriate for several accounting apps.
It is worth saying that not every record-keeping application is HMRC-approved. There are actually strict rules in place regarding cash basis and less complicated expenditures, thus it`s usually worth evaluating various recording specifications before investing time and energy into a record-keeping app.
Keep personal finances separate
It is not unlawful to make use of your personal bank account for business â€“ however it`s absolutely more challenging.
Several small entrepreneurs often treat their company’s bank account like a personal income pool â€“ but that`s the first step down a long and winding road to financial self-destruction.
From the moment you form a brand new company, your company operations turn out to be their own separate entity in the sight of the law. This implies that your company need to have its personal bank account so as not to confuse its earnings with your personal finances.
Furthermore, even if you are building a limited company, opening a separate account for it makes sense so as to separate business bank account due to the fact cheques issued out to a limited company usually cannot be paid into a personal bank account..
Having said that, it is not against the regulations to make use of your personal bank account to operate a UK business. Though it results in a more challenging accounting circumstance, HMRC provides a bit of guidance on the kind of records you may be required to maintain in case you decide to go this route.
These records include things like:
â€¢ Bank and building society statements
â€¢ Retain duplicates of every bank statement and
â€¢ Passbook for every account containing cash from your business.
Personal drawings: In case you fail to have a different business bank account, you will have to maintain a comprehensive analysis of every bank statement outlining which cash withdrawals were business-related as well as personal.
Source of funds: You are expected to record any private money introduced into the business and from where it came from â€“ regardless of whether it was gifted from a friend or relative.