When you start a new business full of excitement for the adventure to come, then record keeping is probably not the first thing you think about. However it’s prudent to start out with good practices and you’ll thank yourself when your tax return is due. Your records must be accurate and complete, saving every document that is connected to a business expense is a must. These things can be difficult to keep track of so make sure you deal with them properly.
Maintaining accurate records is a fundamental aspect of operating a successful business. It is imperative to document every financial transaction going in and out of your business. Record keeping can be achieved through traditional paper-based methods or electronically using computer software. Relevant documents that need to be recorded comprise invoices, sales receipts, proof of purchases, and bank statements.
Your invoices need to have some basic information each time you produce one. You should always include the date, customer name, customer address, the due date and you should issue each separate invoice with it’s own number. When you are listing the products or services you have provided, work out a standard way of describing these. If you use different terms for the same service this will get confusing for the customer. List out everything you offer and allocate a price to it. This could also be your price list, but if you don’t have one make a list like this just for your own benefit. It will make your admin much easier and future invoicing quicker.
Keep your invoices in chronological order and have a system for noting when they have been paid. If you keep paper records, then filing the paid invoices in a new file will help you see which ones remain unpaid. This is good practice for keeping accurate records, as you’ll need to see at a glance if there are any invoices that are overdue, so you can chase them up.
Issue your invoices on a regular basis, at least once a month if you can. If you can issue invoices immediately this is best practice. You are far more likely to get paid when it’s fresh in the customers mind what a good job you did, and setting yourself good standards when it comes to admin will be much more productive than letting it slide.
If your business is registered for VAT, it is essential to maintain accurate records of the VAT you have charged your customers and the VAT you have paid to your suppliers. Make sure you understand what the VAT rates are for the different goods and services that you provide. If you don’t know or are unsure then check the government guidelines.
All businesses that are registered for VAT must comply with the regulations of Making Tax Digital for VAT. This means that you must use Making Tax Digital software to manage and submit your VAT records. It is important to keep your records for a minimum of six years as they may be required to verify that the correct amount of tax has been paid.
It is crucial to maintain a clear distinction between your personal and business transactions. Withdrawing funds from your business account for personal purposes is not considered a legitimate business expense. Get yourself a business bank account that is separate from your own money.
Check your bank statements regularly to ensure that they agree with your own records. Accountants call this ‘bank reconciliation’. You’ll be able to spot bounced payments from customers, potential fraud, and any human errors that you have made in your own records. It’s a good habit to get into and one that every business should do at least once a month.
If your receipts are for lots of different things this can become tricky and you run into problems remembering what they were for. Dividing your expenses into categories like petrol, stationery or food is a useful tip. Ideally you should write them up in a ledger, noting the date, amount spent and type of expense.
At Xpert-Technologies we offer an invoice scanning service that takes away the stress of dealing with invoices and receipts. Simply scan and upload your documents. Our software will sort out your financial information automatically. It’s quick and easy and really takes away the headache of dealing with paperwork. For more information click here… Invoice Scanning
Basic record keeping need not be overwhelming. At the beginning of your entrepreneurial journey it’s important to stay focussed on your ambition and build a business that fills you with enthusiasm and makes you proud. Take a look at all our software solutions for small businesses it could really help your dream take off!
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